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/CFM/- 



■7H3^I .^ ^/y^b / 




The 
^ORTH CAROLINA 

REGISTER 



IN THIS ISSUE 



GENERAL STATUTES 



EXECUTIVE ORDERS 



FINAL DECISION LETTER 



PROPOSED RULES 



Crime Control and Public Safety 




Environment, Health, 


and Natural Resources 


Human Resources 






FINAL RULES 


f?ECE»VED 


Revenue 

List of Rules Codified 

ARRC OBJECTIONS 


OCT 
CAW 


15 1991 
LIBRARY 



RULES INVALIDATED BY JUDICIAL DECISION 



ISSUE DATE: SEPTEMBER 30, 1991 
Volume 6 • Issue 13 • Pages 784-923 



INFORMATION ABOUT THE NORTH CAROLINA REGISTER AND ADMINISTRATIVE CODE 



NORTH CAROLINA REGISTER 

The North Carolina Register is published bi-monthly 
and contains information relating to agenc>', executi\e, 
legislati\e and judicial actions required b>' or affecting 
Chapter 150B of the General Statutes. All proposed, ad- 
ministrative rules and amendments filed under Chapter 
150B must be published in the Register. The Register 
will t>pically comprise approximately fifty pages per 
issue of legal text. 

State law requires that a copy of each issue be pro- 
\ided free of charge to each county in the state and to 
various state officials and institutions. The North CaroHna 
Register is a\ailable by yearly subscription at a cost of 
one hundred and five dollars ($105.00) for 24 issues. 

Requests for subscriptions to the North Carolina 
Register should be directed to the Office of Ad- 
ministrative Hearings, P. O. Drawer 27447, Raleigh, N. 
C. 27611-7447, Attn: Subscriptions. 

ADOPTION, AMENDMENT, AND REPEAL OF 
RULES 

An agency intending to adopt, amend, or repeal a rule 
must first publish notice of the proposed action in the 
North Carolina Register. The notice must include the 
time and place of the public hearing; a statement of how- 
public comments may be submitted to the agency either 
at the hearing or otherwise; the text of the proposed 
rule or amendment; a reference to the Statutory 
Authority for the action and the proposed effective date. 

The Director of the Office of Administrati\e Hearings 
has authority to publish a summary, rather than the 
full text, of any amendment which is considered to be 
too lengthy. In such case, the full text of the rule con- 
taining the proposed amendment will be available for 
public inspection at the Rules Division of the Office of 
Administrati\e Hearings and at the office of the pro- 
mulgating agency. 

Unless a specific statute pro\'ides otherwise, at least 
30 days must elapse following publication of the pro- 
posal in the North Carolina Register before the agencv 
may conduct the required public hearing and take ac- 
tion on the proposed adoption, amendment or repeal. 

When final action is taken, the promulgating agency 
must file any adopted or amended rule for approval by 
the Administrati\'e Rules Re\iew Commission. Upon ap- 
proval of ARRC, the adopted or amended rule must be 
filed with the Office of Administrative Hearings. If it 
differs substantially from the proposed form published 
as part of the public notice, upon request b>- the agen- 
cy, the adopted \ersion will again be published in the 
North Carolina Register. 

A rule, or amended rule cannot become effective 
earlier than the first day of the second calendar month 
after the adoption is filed with the Office of Ad- 
ministrative Hearings for publication in the NCAC. 

Proposed action on rules may be withdrawn by the 
promulgating agency at any time before final action is 
taken by the agency. 

TEMPOIL4RY RULES 

Under certain conditions of an emergency' nature, 
some agencies may issue temporary rules. A temporary- 
rule becomes effective when adopted and remains in 



effect for the period specified in the rule or 180 days, 
whichever is less. An agency adopting a temporary rule 
must begin normal rule-making procedures on the per- 
manent rule at the same time the temporary rule is 
adopted. 

NORTH CAROLINA ADMINISTRATIVE CODE 

The North Carolina Administrati\-e Code (NCAC) is 
a compilation and index of the administrative rules of 
25 state agencies and 38 occupational licensing boards. 
The NCAC comprises approximately 15,000 letter size, 
single spaced pages of material of which approximate- 
ly 35% is changed annually. Compilation and publica- 
tion of the NCAC is mandated by G.S. 150B-63(b). 

The Code is di\-ided into Titles and Chapters. Each 
state agency is assigned a separate title which is fur- 
ther broken down by chapters. Title 21 is designated 
for occupational licensing boards. 

The NCAC is available in two formats. 

(1) Single pages may be obtained at a minimum 
cost of two dollars and 50 cents ($2.50) for 10 
pages or less, plus fifteen cents ($0.15) per each 
additional page. 

(2) The full publication consists of 53 volumes, 
totaling in excess of 15,000 pages. It is sup- 
plemented monthly with replacement pages. A 
one year subscription to the full publication in- 
cluding supplements can be purchased for 
seven hundred and fifty dollars ($750.00). In- 
di\-idual \-olumes may also be purchased with 
supplement service. Renewal subscriptions for 
supplements to the initial publication a\-ailable 

Requests for pages of rules or \-olumes of the NCAC 
should be directed to the Office of Administrativ* 
Hearings. 

NOTE 

The foregoing is a generalized statement of the pro 
cedures to be folloN^ed. For specific statutory- language 
it is suggested that Articles 2 and 5 of Chapter I50B o 
the General Statutes be examined carefully. 

CITATION TO THE NORTH CAROLINA 
REGISTER 

The North Carolina Register is cited bv \-olume, issue 
page number and date. 1:1 NCR 101-201, April 1, 198 

refers to Volume 1, Issue 1, pages 101 through 201 o 
the North Carolina Register issued on April 1, 1986. 



North Carolina Register. Published bi-monthly by the 
Office of Administrative Hearings, P.O. Drawer 27447, 
Raleigh, North Carolina 27611-7447, pursuant to 
Chapter 150B of the General Statutes. Subscriptions 
one hundred and fi\-e dollars (S105.00) per year. 

North Carolina Administrative Code. Published in 
looseleaf notebooks with supplement service by the 
Office of Administrati\e Hearings, P.O. Drawer 27447, 
Raleigh, North Carolina 27611-7447, pursuant to 
Chapter 150B of the General Satutes. Subscriptions 
se\-en hundred and fifty dollars ($750.00). Individual 
Nolumes a\ailable. 



NORTH 
CAROLINA 
REGISTER 



ISSLE CONTENTS 




OJJlce of Administrative Hearings 

P. O. Drawer 27447 

Raleigh, \C 27611-7447 

(919) 733-2678 



I. GENERAL STA IT TES 

Chapter I SOB 784 

II. EXECl TFV E ORDERS 

Executive Orders 149-150 804 

III. EINAL DECISION LEITER 

Voting Rights Act 806 



IV. PROPOSED Rl EES 

Crime Control and Public 
Safety 

State Highway Patrol 809 

Environment, Health, and 
Natural Resources 

Health Scnices 815 

Land Resources 810 

Human Resources 
Medical Assistance 807 



Julian Mann III, 

Director 
James R. Scarcella Sr., 

Deputy Director 
Molly NIasich, 

Director APA Services 



Staff: 

Ruby Creech, 

Publicalions Coordinator 
Teresa Kilpatrick, 

Editorial Assistant 
Jean Shirley, 

Editorial Assistant 



V. EESAL RULES 
Revenue 

Corporate Income ;md 

Franchise Tax Division 816 

Sales and Use Tax 817 

List of Rules Codified 907 

VI. ARRC OBJECTIONS 916 

VII. RULES INV AI IDATED BV 

JUDICIAL DECISION 919 

VIII. CUMULATIVE INDEX 921 



NORTH CAROLINA REGISTER 

Publication Schedule 

(October 1991 - December 1992) 



Issue Last Day Last Day Earliest 

Date for for Date for 

Filing Electronic Public 

Filing Hearing 



Earliest 
Date for 
Adoption 
by 
Agency 



Last Day * 

to Earliest 

Submit Effective 

to Date 

RRC 



++*++++++++++*+++++++*++++++*+++++*+**++++♦++++*++++++++*++++++++++ 



10/01/91 
10/15/91 
11,01/91 
11/15/91 
12/02/91 
12/16'91 
01/02/92 
01/15/92 
02/03/92 
02/14/92 
03/02/92 
03/16/92 
04 01,92 
04/15/92 
05/01/92 
05/15/92 
06/01/92 
06/15/92 
07/01/92 
07/15/92 
08/03/92 
08/14/92 
09/01 92 
09/15 92 
10/01/92 
10/15/92 
11/02/92 
11/16/92 
12 01/92 
12/15/92 



09/10/91 
09/24/91 
10/11/91 
10/24/91 
11/07/91 
11/21/91 
12/09/91 
12/20/91 
01/10/92 
01/24/92 
02/10/92 
02/24/92 
03/11/92 
03/25/92 
04/10/92 
04/24/92 
05/11/92 
05/25/92 
06/10/92 
06/24/92 
07/13/92 
07/24/92 
08/11/92 
08/25/92 
09/10/92 
09/24/92 
10/12/92 
10/23/92 
11/06/92 
11/24/92 



09/17/91 
10/01/91 
10/18/91 
10/31/91 
11/14/91 
12/02/91 
12/16/91 
12/31/91 
01/17/92 
01/31/92 
02/17/92 
03/02/92 
03 '18/ 92 
04/01/92 
04/17/92 
05/01/92 
05/18/92 
06/01/92 
06-17,92 
07/01 .'92 
07/20,92 
07/31/92 
08/18^92 
09/01/92 
09,-17/92 
10/01/92 
10/19/92 
10/30/92 
11/13/92 
12^01/92 



10/31/91 
10/30/91 
11/16/91 
11/30/91 
12/17/91 
12/31/91 
01/17/92 
01/30/92 
02/18/92 
02/29/92 
03/17/92 
03/31/92 
04/16/92 
04/30/92 
05/16/92 
05/30/92 
06/16/92 
06/30/92 
07/16/92 
07/30/92 
08/18/92 
08/29/92 
09/16/92 
09/30/92 
10/16/92 
10/30/92 
11/17/92 
12/01/92 
12/16/92 
12/30/92 



10/31/91 
11/14/91 
12/01/91 
12/15/91 
01/01/92 
01/15/92 
01/31/92 
02/14,92 
03/04/92 
03/15/92 
04/01/92 
04/15/92 
05/01/92 
05/15/92 
05/31/92 
06/14/92 
07/01/92 
07/15/92 
07/31/92 
08/14/92 
09/02/92 
09/13/92 
10/01/92 
10/15/92 
10/31/92 
11/14/92 
12/02/92 
12/16/92 
12/31/92 
01/14/93 



11/20/91 
11/20/91 
12/20/91 
12/20/91 
01/20/92 
01/20/92 
02/20/92 
02/20/92 
03/20/92 
03/20/92 
04,'20/92 
04/20/92 
05.'20/92 
05/20/92 
06/20/92 
06/20/92 
07/20/92 
07/20/92 
08/20/92 
08/20/92 
09/20/92 
09/20/92 
10/20/92 
10/20/92 
11/20 92 
11/20/92 
12/20/92 
12/20/92 
01/20/93 
01/20/93 



02/01/92 
01/01/92 
02/01/92 
02/01/92 
03/01/92 
03/01/92 
04/01/92 
04/01/92 
05/01/92 
05/01/92 
06/01/92 
06/01/92 
07/01/92 
07,01/92 
08/01/92 
08/01/92 
09/01/92 
09/01/92 
10/01/92 
10/01/92 
11/01/92 
11/01/92 
12 01/92 
12/01/92 
01/01/93 
01/01/93 
02/01/93 
02/01/93 
03/01/93 
03,01/93 



* The "Earliest Effective Date" is computed assuming that the agency follows 
the publication schedule above, that the Rules Review Commission approves the 
rule at the next calendar month meeting after submission, and that RRC delivers 
the rule to the Codifier of Rules five (5) business days before the 1st of the next 
calendar month. 



GENERAL ST A TUTES OF NOR TH CAROLINA 



CHAPTER 150B 
THE ADMINISTRATIVE PROCEDURE ACT 



[The following excerpt contains the statutory- provisions of the Administrative Procedure Act as 
amended by the 1991 Regular Session of the General Assembly effective October 1, 1991, except 
150B-l(d)(5) and 150B-l(eX10), effective July 16, 1991.) 



Article 1. 
General Provisions. 
§ 150B-1. Policy and scope. 

(a) Purpose. -- This Chapter establishes a uni- 
form system of administrative rule making and 
adjudicatory procedures for agencies. Ihe pro- 
cedures ensure that the functions of rule making, 
investigation, advocacy, and adjudication are not 
all performed by the same person in the admin- 
istrative process. 

(b) Rights. -- rhis Chapter confers procedural 
rights. 

(c) Full Exemptions. — This Chapter appUes 
to every agency except: 

(1) The North Carolina National Guard in 
exercising its court-martial jurisdiction. 
The Department of Human Resources in 
exercising its authority over the Camp 
Butner reservation granted in Article 6 of 
Chapter 122C of the General Statutes. 
The Ltihties Commission. 
The Industrial Commission. 
The Employment Security Commission. 
Exemptions From Rule Making. -- Article 
2A of this Chapter does not apply to the follow- 
ing: 

The Commission. 

The North Carolina Low- Level Radioac- 
tive Waste Management Authority in ad- 
ministering the provisions of G.S. 
104G-10andG.S. 104G-11. 
The North Carolina Hazardous Waste 
Management Commission in administer- 
ing the provisions of G.S. BOB- 13 and 
G.S. 130B-14. 

The Department of Revenue, except that 
Parts 3 and 4 of /Vrticle 2A apply to the 
Department. 
The North Carolina Air Cargo /Virport 
Authority with respect to the acquisition, 
construction, operation, or use, including 
fees or charges, of any portion of a cargo 
airport complex. 

Exemptions From Contested Case Pro- 
visions. -- The contested case provisions of this 
Chapter apply to all agencies and all proceedings 



(2) 



(3) 
(4) 
(5) 
(d) 



(1) 

(2) 



(3) 



(4) 



(5) 



(e) 



not expressly exempted from the Chapter. The 
contested case provisions of this Chapter do not 
apply to the following: 

(1) The Department of Human Resources 
and the Department of Environment, 
Health, and Natural Resources in com- 
plying with the procedural safeguards 
mandated by Section 680 of Part H of 
Public Law 99-457 as amended (Educa- 
tion of the Handicapped Act Amend- 
ments of 1986). 

(2) The Governor's Waste Management 
Board in administering the provisions of 
G.S. 104E-6.2 and G.S. 130A-293. 

(3) The North Carolina Low-Level Radio- 
active Waste Management Authority in 
administering the provisions of G.S. 
104G-9, 104G-10, and 104G-11. 

(4) The North Carolina Hazardous Waste 
Management Conunission in administer- 
ing the provisions of G.S. 130B-11, 
130B-13, and 130B-14. 

(5) Hearings required pursuant to the Reha- 
bilitation Act of 1973, (Public Law 
93-122), as amended and federal regu- 
lations promulgated thereunder. G.S. 
150B-51(a) is considered a contested case 
hearing provision that does not apply to 
these hearings. 

(6) The Department of Revenue. 

(7) The Department of Correction. 

(8) The Department of Transportation, ex- 
cept as provided in G.S. 136-29. 

(9) The Occupational Safety and Health Re- 
view Board in all actions that do not in- 
volve agricultural employers. 

(10) The North Carolina Air Cargo Airport 
Authority with respect to the acquisition, 
construction, operation, or use, including 
fees or charges, of any portion of a cargo 
airport complex, 
(f) Exemption From All But Judicial Review. 

— No Article in this Chapter except Article 4 

applies to the University of North CaroUna. 

§ 150B-2. Definitions. - As used in this 

Chapter, 



6:13 NORTH CAROLINA REGISTER September 30, 1991 



784 



GENERAL ST A TUTES OF NORTH CAROLINA 



(01 ) "/\dininistrative law judge" means a per- 
son appointed under G.S. 7A-752, 
7A-753, or 7A-757. 

(1) "Agency" means an agency or an otTicer 
in the executi\-e branch of the government 
of this State and includes the Council of 
State, the Governor's OtTice, a board, a 
commission, a department, a division, a 
council, and any other unit of government 
in the executive branch. A local unit of 
government is not an agency. 

(la) "Adopt" means to take fmal action to 
create, amend, or repeal a rule. 

(lb) "Coditler of Rules" means the Chief 
Administrative Law Judge of the OlTice 
of Administrative Hearings or a desig- 
nated representati\e of the Chief Admin- 
istrative Law Judge. 

(Ic) "Commission" means the Rules Review 
Commission. 

(2) "Contested case" means an administrative 
proceeding pursuant to this Chapter to 
resolve a dispute between an agency and 
another person that invohes the person's 
nglits, duties, or privileges, including li- 
censing or the lew of a monetar>' penalty. 
"Contested case" does not include 
rulemaking, declaratorv' rulings, or the 
award or denial of a scholarship or grant. 

Repealed. 
"Hearing officer" means a person or 
group of persons designated by an agency 
that is subject to /Vrticle 3A of this Chap- 
ter to preside in a contested case hearing 
conducted under that /Vrticle. 

"License" means any certificate, permit 
or other evidence, by whatever name 
called, of a right or privilege to engage in 
any activity, except licenses issued under 
Chapter 20 and Subchapter I of Chapter 
105 of the General Statutes and occupa- 
tional licenses. 

(4) "Licensing" means an\' administrative 
action issuing, failing to issue, suspending, 
or re\oking a license or occupational li- 
cense. "Licensing" docs not include con- 
tro\ersies over whether an examination 
was fair or whether the applicant passed 
the examination. 

(4a) "Occupational license" means any certif- 
icate, permit, or other e\idence, by what- 
ever name caUed, of a right or pnvilege to 
engage in a profession, occupation, or 
field of endeavor that is issued by an oc- 
cupational licensing agency. 

(4b) "Occupational licensing agency" means 
any board, commission, committee or 
other aaencv of the State of North 



(Ja) 
(2b) 



(3) 



Carolina which is established for the pri- 
mar,' purpose of regulating the entr\' of 
persons into, and or the conduct of per- 
sons within a particular profession, occu- 
pation or field of endeavor, and which is 
authorized to issue and re\'oke licenses. 
"Occupational hcenstng agency" does not 
include State agencies or departments 
which may as only a part of their regular 
function issue permits or hcenses. 

(5) "Party" means any person or agency 
named or admitted as a party or properly 
seeking as of right to be admitted as a 
party and includes the agency as appro- 
priate. This subdivision does not permit 
an agency that makes a fmal decision, or 
an officer or employee of the agency, to 
petition for initial judicial re\iew of that 
decision. 

(6) "Person aggrieved" means any person or 
group of persons of common interest di- 
rectly or indirectly affected substantially in 
his or its person, property, or employment 
by an administrative decision. 

(7) "Person" means any natural person, part- 
nership, corporation, body politic and any 
unincorporated association, organization, 
or society which may sue or he sued under 
a common name. 

(8) "Residence" means domicile or principal 
place of business. 

(8a) "Rule" means any agency regulation, 
standard, or statement of general apphca- 
bility that implements or interprets an 
enactment of the General Assembly or 
Congress or a regulation adopted by a 
federal agency or that describes the pro- 
cedure or practice requirements of an 
agency. The term includes the establish- 
ment of a fee and the amendment or re- 
peal of a pnor rule. The term does not 
include the following: 

a. Statements concerning only the internal 
management of an agency or group of 
agencies within the same principal office 
or department enumerated m G.S. 143-11 
or 143B-6, including policies and proce- 
dures manuals, if the statement does not 
directly or substantially affect the proce- 
dural or substantive rights or duties of a 
person not employed by the agency or 
group of agencies. 

b. Budgets and budget pohcies and proce- 
dures issued by the Director of the 
Budget, bv the head of a department, as 
defmed by G.S. 143A-2 or G.S. 143B-3, 
by an occupational licensing board, as 



785 



6:13 NORTH CAROLINA REGISTER September 30, 1991 



GENERAL ST A TUTES OF NOR TH CAROLINA 



defined by G.S. 93B-1, or by the State 
Board of Elections. 

c. Nonbinding interpretive statements 
within the delegated authority of an 
agency that merely defme, interpret, or 
explain the meaning of a statute or rule. 

d. A form, the contents or substantive re- 
quirements of which are prescribed by rule 
or statute. 

e. Statements of agency pohcy made in the 
context of another proceeding, including: 

1. Declaratory rulings under G.S. 150B-4; 

2. Orders estabhshing or fixing rates or 
tariffs. 

f Requirements, communicated to the 
public by the use of signs or symbols, 
concerning the use of pubhc roads, 
bridges, ferries, buUdings, or facilities, 
g. Statements that set forth criteria or 
guidelines to be used by the staff of an 
agency in performing audits, investi- 
gations, or inspections; in setthng financial 
disputes or negotiating fmancial arrange- 
ments; or in the defense, prosecution, or 
settlement of cases, 
h. Scientific, architectural, or engineering 
standards, forms, or procedures, including 
design criteria and construction standards 
used to construct or maintain highways, 
bridges, or ferries. 
i. Job classification standards, job quali- 
fications, and salaries estabUshed for posi- 
tions under the jurisdiction of the State 
Personnel Commission, 
j. Establishment of the interest rate that 
applies to tax assessments under G.S. 
105-241.1 and the variable component of 
the excise tax on motor fuel under G.S. 
105-434. 
(8b) ''Substantial evidence" means relevant 
evidence a reasonable mind might accept 
as adequate to support a conclusion. 
(9) Repealed, 
§ 150B-3. Special provisions on licensing. 

(a) When an apphcant or a licensee makes a 
timely and sufficient apphcation for issuance or 
renewal of a license or occupational license, in- 
cluding the payment of any required license fee, 
the existing license or occupational license does 
not expire until a decision on the application is 
fmally made by the agency, and if the application 
is denied or the terms of the new license or oc- 
cupational license are limited, until the last day 
for applying for judicial review of the agency or- 
der. This subsection does not affect agency 
action summarily suspending a license or occu- 
pational hcense under subsections (b) and (c) of 
this section. 



(b) Before the commencement of proceedings 
for the suspension, revocation, annulment, with- 
drawal, recall, cancellation, or amendment of any 
License other than an occupational license, the 
agency shall give notice to the hcensee, pursuant 
to the provisions of G.S. 150B-23. Before the 
commencement of such proceedings involving an 
occupational license, the agency shall give notice 
pursuant to the provisions of G.S. 150B-38. In 
either case, the licensee shall be given an oppor- 
tunity to show compliance with all lawful re- 
quirements for retention of the license or 
occupational hcense. 

(c) If the agency fmds that the pubhc health, 
safety, or welfare requires emergency action and 
incorporates this fmding in its order, summary 
suspension of a license or occupational hcense 
may be ordered effective on the date specified in 
the order or on service of the certified copy of the 
order at the last known address of the hcensee, 
whichever is later, and effective during the pro- 
ceedings. The proceedings shall be promptly 
commenced and determined. 

Nothing in this subsection shall be construed 
as amending or repealing any special statutes, in 
effect prior to Eebruary 1, 1976, which provide 
for the summary' suspension of a hcense. 
§ 150B-4. Declaratory rulings. 

(a) On request of a person aggrieved, an agency 
shall issue a declaratory ruling as to the validity 
of a rule or as to the apphcability to a given state 
of facts of a statute administered by the agency 
or of a rule or order of the agency, except when 
the agency for good cause finds issuance of a 
ruling undesirable. The agency shall prescribe in 
its rules the circumstances in which rulings shall 
or shall not be issued. A declaratory ruling is 
binding on the agency and the person requesting 
it unless it is altered or set aside by the court. 
An agency may not retroactively change a 
declaratory ruling, but nothing in this section 
prevents an agency from prospectively changing 
a declaratory ruling. A declarator)' ruling is 
subject to judicial review in the same manner as 
an order in a contested case. Failure of the 
agency to issue a declaratory ruhng on the merits 
within 60 days of the request for such ruling shall 
constitute a denial of the request as well as a de- 
nial of the merits of the request and shall be 
subject to judicial re\iew. 

(b) This section does not apply to the Depart- 
ment of Correction. 

/Vrticle 2. 

Rule Making. 

Repealed. 



6:13 NORTH CAROLINA REGISTER September 30, 1991 



786 



GENERAL ST A TUTES OF NORTH CAROLINA 



/\rlicle 2A. 
Rules. 
Part 1. General Provisions. 
§ I50B-18. Scope and effect. 

This /Vrticle applies to an agency's exercise of its 
authority to adopt a rule. A rule is not valid 
unless it is adopted in substantial compliance 
with this .Article. 

§ 150Ei-19. Restrictions on what can be 

adopted as a rule. 

An agency may not adopt a rule that does one 
or more of the following: 

(1) Implements or interprets a law unless that 
law or another law specifically authorizes 
the agency to do so. 

(2) Enlarges the scope of a profession, occu- 
pation, or field of endeavor for which an 
occupational license is required. 

(3) Imposes criminal liability or a ci\'il penalty 
for an act or omission, including the vio- 
lation of a rule, unless a law specifically 
authorizes the agency to do so or a law 
declares that violation of the rule is a 
criminal offense or is grounds for a civU 
penalty. 

(4) Repeats the content of a law, a rule, or a 
federal regulation. 

(5) Establishes a reasonable fee or other rea- 
sonable charge for providing a ser\'ice in 
fulfillment of a duty unless a law specif- 
ically authorizes the agency to do so or 
the fee or other charge is for one of the 
foUowing: 

a. A ser\'ice to a State, federal, or local 
governmental unit. 

b. A copy of part or all of a State publica- 
tion or other document, the cost of mail- 
ing a document, or both. 

c. A transcript of a public hearing. 

d. A conference, workshop, or course. 

e. Data processing services. 

(6) .Allows the agency to waive or modify a 
requirement set in a rule unless a rule es- 
tablishes specific guidelines the agency 
must follow in determining whether to 
waive or modify the requirement. 

§ I50B-20. Petitioning an agency to adopt a 
rule. 

(a) Petition. - A person may petition an 
agency to adopt a rule by submitting to the 
agency a written rule-making petition requesting 
the adoption. A person may submit written 
comments with a rule-making petition. If a 
rule-makmg petition requests the agency to create 
or amend a rule, the person must submit the 
proposed text of the requested rule change and a 
statement of the effect of the requested rule 
change. Each asencv must establish bv rule the 



procedure for submitting a rule-making petition 
to it and the procedure the agency follows in 
considering a rule-making petition. 

(b) Time. — An agency must grant or deny a 
rule-making petition submitted to it within 30 
days after the date the rule-making petition is 
submitted, unless the agency is a board or com- 
mission. If the agency is a board or commission, 
it must grant or deny a rule-making petition 
within 120 days after the date the rule-making 
petition is submitted. 

(c) Action. -- If an agency denies a rule-making 
petition, it must send the person who submitted 
the petition a written statement of the reasons for 
denying the petition. If the agency grants a 
rule-making petition, it must inform the person 
who submitted the rule-making petition of its 
decision and must initiate rule-making pro- 
ceedings. When an agency grants a rule-making 
petition requesting the creation or amiendment 
of a rule, the notice of rule making it pubhshes 
in the North Carolina Register may state that the 
agency is initiating rule-making proceedings as 
the result of a rule-making petition, state the 
name of the person who submitted the rule- 
making petition, set out the text of the requested 
rule change submitted with the rule-making peti- 
tion, and state whether the agency endorses the 
proposed nile change. 

(d) Review. — Denial of a rule-making petition 
is a final agency decision and is subject to judicial 
review under /Vrticle 4 of this Chapter. Failure 
of an agency to grant or deny a rule-making pe- 
tition within the tmie limits set in subsection (b) 
is a denial of the rule-making petition. 

(e) Exception. -- This section does not apply 
to the Department of Correction. 

§ 150B-21. .Agency must designate rule- 

making coordinator. 

Each agency must designate one or more rule- 
making coordinators to oversee the agency's 
rule-making functions. The coordinator must 
prepare notices of public hearings, coordinate 
access to the agency's rules, and serve as the liai- 
son between the agency, other agencies, and the 
public in the rule-making process. 

Part 2. .-\doption of Rules. 
§ 150B-2I.I. Procedure for adopting a tem- 
porary rule. 

(a) .Adoption. -- .An agency may adopt a tem- 
porary rule without prior notice or hearing or 
upon any abbreviated notice or hearing the 
agency fmds practical when it fmds that adher- 
ence to the notice and hearing requirements of 
this Part would be contrary to the public interest 
and that the immediate adoption of the rule is 
required by one or more of the following: 



787 



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GENERAL STA TUTES OF NORTH CAROLINA 



(1) A serious and unforeseen threat to the 
public heahh, safety, or welfare. 

(2) The effective date of a recent act of the 
General Assembly or the United States 
Congress. 

(3) A recent change in federal or State budg- 
etary policy. 

(4) A federal regulation. 

(5) A court order. 

An agency must prepare a written statement of 
its findings of need for a temporary rule. The 
statement must be signed by the head of the 
agency adopting the rule. 

An agency must begin rule-making proceedings 
for a permanent rule by the day it adopts a tem- 
porary rule. An agency begins rule-making pro- 
ceedings for a permanent rule by submitting to 
the codifier written notice of its intent to adopt 
a permanent rule. 

(b) Review. — When an agency adopts a tem- 
porary rule it must submit the rule, the agency's 
written statement of its fmdings of need for the 
rule, and the notice of intent to adopt a perma- 
nent rule to the Codifier of Rules. Withm one 
business day after an agency submits a temporary 
rule, the Codifier of Rules must review the agen- 
cy's written statement of fmdings of need for the 
rule to determine whether the statement of need 
meets the criteria listed in subsection (a). In re- 
viewing the statement, the Codifier of Rules may 
consider any information submitted by the 
agency or another person. If the Codifier of 
Rules finds that the statement meets the criteria, 
the Codifier of Rules must notify the head of the 
agency and enter the rule in the North Carolina 
Administrative Code. 

If the Codifier of Rules fmds that the statement 
does not meet the criteria, the Codifier of Rules 
must immediately notify the head of the agency. 
The agency may supplement its statement of 
need with additional fmdings or submit a new 
statement. If the agency provides additional 
findings or subiiuts a new statement, the Codifier 
of Rules must review the additional fmdings or 
new statement within one business day after the 
agency submits the additional findings or new 
statement. If the Codifier of Rules again fmds 
that the statement does not meet the criteria 
listed in subsection (a), the Codifier of Rules 
must immediately notify the head of the agency. 

If an agency decides not to provide additional 
fmdings or submit a new statement when notified 
by the Codifier of Rules that the agency's 
fmdings of need for a rule do not meet the re- 
quired criteria, the agency must notify the 
Codifier of Rules of its decision. The Codifier 
of Rules must then enter the rule in the North 
Carolina Administrative Code on the sixth busi- 



ness day after receiving notice of the agency's 
decision. 

(c) Standing. — A person aggrieved by a tem- 
porary rule adopted by an agency may fde an 
action for declaratory judgment in Wake County 
Superior Court pursuant to Article 26 of Chapter 
1 of the General Statutes. In the action, the 
court shall determine whether the agency's writ- 
ten statement of findings of need for the rule 
meets the criteria listed in subsection (a) and 
whether the rule meets the standards in G.S. 
150B-21.9 that apply to review of a permanent 
rule. The court may not grant an ex parte tem- 
porary restraining order. 

Filing a petition for rule making or a request for 
a declaratory ruling with the agency that adopted 
the rule is not a prerequisite to filing an action 
under this subsection. A person who files an 
action for declaratory judgment under this sub- 
section must serve a copy of the complaint on 
the agency that adopted the rule being contested, 
the Codifier of Rules, and the Commission. 

(d) Effective Date and Expiration. -- A tem- 
porary rule becomes effective on the date speci- 
fied in G.S. 150B-21.3. A temporary rule expires 
on the date specified in the rule or 1 80 days from 
the date the rule becomes effective, whichever 
comes first. 

§ I50B-21.2. Procedure for adopting a per- 

manent rule. 

(a) Notice. — Before an agency adopts a per- 
manent rule, it must publish notice of its intent 
to adopt a permanent rule in the North Carolina 
Register and as required by any other law. The 
notice published in the North Carolina Register 
must include all of the following: 

(1) Either the text of the proposed rule or a 
statement of the subject matter of the 
proposed rule making. 

(2) A short explanation of the reason for the 
proposed action. 

(3) A citation to the law that gives the agency 
the authority to adopt the proposed rule, 
if the notice includes the text of the pro- 
posed rule, or a citation to the law that 
gives the agency the authority to adopt a 
rule on the subject matter of the proposed 
rule making, if the notice includes only a 
statement of the subject matter of the 
proposed rule making. 

(4) The proposed effective date of the pro- 
posed rule, if the notice includes the text 
of the proposed rule, or the proposed ef- 
fective date of a rule adopted on the sub- 
ject matter of the proposed rule making, 
if the notice includes only a statement of 
the subject matter of the proposed rule 
making. 



6:li NORTH CAROLINA REGISTER September 30, 1 99 1 



788 



GENERAL ST A TUTES OF NORTH CAROLINA 



(5) The date, time, and place of any public 
hearing scheduled on the proposed rule 
or subject matter of the proposed rule 
making. 

(6) Instructions on how a person may demand 
a public hearing on a proposed rule if the 
notice does not schedule a pubhc hearing 
on the proposed rule and subsection (c) 
requires the agency to hold a pubhc hear- 
ing on the proposed rule when requested 
to do so. 

(7) The period of time during vshich and the 
person to whom written comments may 
be submitted on the proposed rule or 
subject matter of the proposed rule mak- 
ing. 

(8) If a fiscal note has been prepared for the 
proposed rule or will be prepared when a 
rule is proposed on the subject matter of 
the proposed rule making, a statement 
that a copy of the fiscal note can be ob- 
tained from the agency. 

(b) Mailing List. -- .\n agency must maintain 
a mailing hst of persons who have requested no- 
tice of rule making. WTien an agency pubUshes 
a rule-making notice in the North Carolina Reg- 
ister, it must mail a copy of the notice to each 
person on the maihng hst who has requested 
notice of rule-making proceedings on the rule or 
the subject matter for rule making described in 
the notice. /Vn agency may charge an annual fee 
to each person on the agency's mailing hst to 
cover copying and mailing costs. 

(c) Heciring. -- .\n agency must hold a pubhc 
hearing on a rule it proposes to adopt in two 
circumstances and may hold a pubhc hearing in 
other circumstances. WTien an agency is required 
to hold a public hearing on a proposed rule or 
decides to hold a pubhc hearing on a proposed 
rule when it is not required to do so, the agency 
must pubhsh in the North Carolina Register a 
notice of the date, time, and place of the pubhc 
hearing. The hearing date of a public hearing 
held after the agency pubhshes notice of the 
hearing in the North Carolina Register must be 
at least 15 days after the date the notice is pub- 
hshed. 

An agency must hold a pubhc hearing on a rule 
it proposes to adopt in the following two cir- 
cumstances: 

( 1) The agency pubhshes a statement of the 
subject matter of the proposed rule mak- 
ing in the notice in the North Carolina 
Register. 

(2) The agency pubhshes the text of the pro- 
posed rule in the notice in the North 
Carohna Register and all the following 
apply: 



a. TTie notice does not schedule a pubhc 
hearing on the proposed rule. 

b. Within 15 days after the notice is pub- 
hshed, the agency receives a written re- 
quest for a pubhc hearing on the proposed 
rule. 

c. The proposed rule is not part of a rule- 
making proceeding the agency initiated by 
pubhshing a statement of the subject 
matter of proposed rule making. 

d. The proposed text is not a changed \'er- 
sion of proposed te.xt the agency previ- 
ously pubhshed in the course of 
rule-making proceedings but did not 
adopt. 

(d) Text After Subject-Matter Notice. -- When 
an agency pubhshes notice of the subject matter 
of proposed rule making in the North Carolina 
Register, it must subsequently pubhsh in the 
North Carohna Register the text of the rule it 
proposes to adopt as a result of the pubhc hear- 
ing and of any comments received on the subject 
matter. An agency may not pubhsh the pro- 
posed text of a rule for which it pubhshed a 
subject-matter notice before the pubhc hearing 
on the subject matter. 

(e) Comments. — .An agency must accept 
comments on the te.xt of a proposed rule pub- 
hshed in the North Carohna Register for at least 
30 days after the text is pubhshed or until the 
date of any pubhc hearing held on the proposed 
rule, whichever is longer. An agency must accept 
comments on a statement of the subject matter 
of proposed rule making until the pubhc hearing 
on the subject matter. An agency must consider 
fuUy aU v/ritten and oral comments received. 

(f) Adoption. -- An agency may not adopt a 
rule until the time for commenting on the pro- 
fKised text of the rule has elapsed and may not 
adopt a rule if more than 12 months have elapsed 
since the end of the time for commenting on the 
proposed text of the rule. An agency may not 
adopt a rule that differs substantiaUy from the 
text of a proposed rule pubhshed m the North 
Carolina Register unless the agency pubhshes the 
text of the proposed different rule in the North 
Carolina Register and accepts comments on the 
proposed different rule for the time set in sub- 
section (e). 

An adopted rule differs substantiaUy from a 
proposed rule if it does one or more of the fol- 
lowing: 

(1) .Affects the interests of persons who, based 
on the notice pubhshed in the North 
Carolina Register or the proposed text of 
the rule, could not reasonably have deter- 
mined that the rule would affect their in- 
terests. 



789 



6:13 NORTH CAROLINA REGLSTER September 30, 1 99 1 



GENERAL ST A TUTES OF NOR TH CAROLINA 



(2) Addresses a subject matter or an issue that 
is not addressed in the proposed text of 
the rule. 

(3) Produces an effect that could not reason- 
ably have been expected based on the 
proposed text of the rule. 

When an agency adopts a rule, it may not take 
subsequent action on the rule without following 
the procedures in this Part. 

(g) Explanation. -- An agency must issue a 
concise written statement explaining why the 
agency adopted a rule if, within 30 days after the 
agency adopts the rule, a person asks the agency 
to do so. The explanation must state the prin- 
cipal reasons for and against adopting the rule 
and must discuss why the agency rejected any 
arguments made or considerations urged against 
the adoption of the rule. 

(h) Record. — An agency must keep a record 
of a rule-making proceeding. 1 he record must 
include all written comments received, a tran- 
script or recording of any public hearing held on 
the rule, and any written explanation made by 
the agency for adopting the rule. 
§ 150B-21.3. Kffcctive date of rules. 

(a) Temporary Rule. — A temporary rule be- 
comes effective on the date the Codifier of Rules 
enters the rule in the North Carolina Adminis- 
trative Code. 

(b) Permanent Rule. — A permanent rule ap- 
proved by the Commission becomes ctTccti\e five 
business days after the Commission delivers the 
rule to the Codifier of Rules, unless the agency 
adopting the rule specifies a later effective date. 
If the agency specifies a later effective date, the 
rule becomes efTective on that date. 

A permanent rule that is not approved by the 
Commission becomes effective five business days 
after the agency adopting the rule delivers the rule 
to the Crodifier of Rules, unless the agency 
adopting the rule specifies a later effective date. 
If the agency specifies a later effective date, the 
rule becomes effective on that date. 

(c) OSHy\ Standard. -- A permanent rule con- 
cerning an occupational safety and health stand- 
ard that is adopted by the Occupational Safety 
and Health Division of the Department of Labor 
and is identical to a federal regulation 
promulgated by the Secretary of the United 
States Department of Labor becomes effective 
on the date the Division delivers the rule to the 
Codifier of Rules, unless the Division specifies a 
later effective date. If the Division specifies a 
later effective date, the rule becomes effective on 
that date. 

§ 150B-21.4. Fiscal notes on rules. 
(a) State Funds. — Before an agency publishes 
in the North Carolina Register the proposed text 



of a permanent rule change that would require 
the expenditure or distribution of funds subject 
to the Executive Budget Act, Article 1 of Chapter 
143, it must submit the text of the proposed rule 
change and a fiscal note on the proposed rule 
change to the Director of the Budget and obtain 
certification from the Director that the funds that 
would be required by the proposed rule change 
are available. The fiscal note must state the 
amount of funds that would be expended or dis- 
tributed as a result of the proposed rule change 
and explain how the amount was computed. 
The Director of the Budget must certify a pro- 
posed rule change if funds are available to cover 
the expenditure or distribution required by the 
proposed rule change. 

(b) Local Funds. -- Before an agency publishes 
in the North Carolina Register the proposed text 
of a permanent rule change that would affect the 
expenditures or revenues of a unit of local gov- 
ernment, it must submit the text of the proposed 
rule change and a fiscal note on the proposed rule 
change to the Fiscal Research Division of the 
General Assembly, the Office of State Budget 
and Management, the North Carolina Associ- 
ation of County Commissioners, and the North 
Carolina League of MunicipaUties. The fiscal 
note must state the amount by which the pro- 
posed rule change would increase or decrease ex- 
penditures or revenues of a unit of local 
government and must explain how the amount 
was computed. 

(c) Errors. — An erroneous fiscal note prepared 
in good faith does not affect the validity of a rule. 
§ I50B-2L5. Circumstances when notice and 
rule-making hearing not required. 

(a) Amendment. -- An agency is not required 
to pubhsh a notice of rule making in the North 
Carolina Register or hold a public hearing when 
it proposes to amend a rule, without changing 
the substance of the rule, to do one of the fol- 
lowing: 

(1) Reletter or renumber the rule or subparts 
of the rule. 

(2) Substitute one name for another when an 
organization or position is renamed. 

(3) Correct a citation in the rule to another 
rule or law when the citation has become 
inaccurate since the rule was adopted be- 
cause of the repeal or renumbering of the 
cited rule or law. 

(4) Change information that is readily avail- 
able to the public, such as an address or 
a telephone number. 

(5) Correct a typographical error made in en- 
tering the rule in the North Carolina Ad- 
ministrative Code. 



6:13 NORTH CAROLINA REGISTER September 30, I99I 



790 



GENERAL ST A TUTES OF NORTH CAROLINA 



(6) Change a rule in response to a request or 
an objection by the Commission. 

(b) Repeal. — An agency is not required to 
publish a notice of rule making in the North 
Carolina Register or hold a pubKc hearing when 
it proposes to repeal a rule as a result of any of 
the following: 

(Ij The law under which the rule was adopted 
is repealed. 

(2) The law under which the rule was adopted 
or the rule itself is declared unconstitu- 
tional. 

(3) The rule is declared to be in excess of the 
agency's statutory authority. 

(c) OSHA Standard. -- The Occupational 
Safety and Health Division of the Department 
of Labor is not required to publish a notice of 
rule making in the North Carolina Register or 
hold a public hearing when it proposes to adopt 
a rule that concerns an occupational safety and 
health standard and is identical to a federal regu- 
lation promulgated by the Secretary of the 
United States Department of Labor. The Occu- 
pational Safety and Health Division is not re- 
quired to submit to the Commission for review 
a rule for which notice and hearing is not re- 
quired under this subsection. 

§ 150B-21.6. Incorjx)rating material in a rule 
by reference. 
An agency may incorporate the following ma- 
terial by reference in a rule without repeating the 
te.\t of the referenced material: 

(1) .Another rule or part of a rule adopted by 
the agency. 

(2) .AH or part of a code, standard, or regu- 
lation adopted by another agency, the 
federal government, or a generally recog- 
nized organization or association. 

(3) Material adopted to meet a requirement 
of the federal go\emment. 

In incorporating material by reference, the 
agency must designate in the rule whether or not 
the incorporation includes subsequent amend- 
ments and editions of the referenced material. 
The agency can change this designation only by 
a subsequent rule-makmg proceeding. The 
agency must have copies of the incorporated 
material available for inspection and must specify 
in the rule both where copies of the material can 
be obtained and the cost on the date the rule is 
adopted of a copy of the material. 

.A statement in a rule that a rule incorporates 
matenal by reference in accordance with former 
G.S. 1 SOB- 14(b) is a statement that the rule does 
not include subsequent amendments and editions 
of the referenced material. A statement in a rule 
that a rule incorporates material by reference in 
accordance with former G.S. 1503- 14(c) is a 



statement that the rule includes subsequent 
amendments and editions of the referenced ma- 
terial. 

§ 150B-21.7. Effect of transfer of duties or 

termination of agency on rules. 

WTien a law that authorizes an agency to adopt 
a rule is repealed and another law gives the same 
or another agency substantially the same author- 
ity to adopt a rule, the rule remains in effect until 
the agency amends or repeals the rule. \\Tien a 
law that authorizes an agency to adopt a rule is 
repealed and another law does not gi\e the same 
or another agency substantially the same author- 
ity to adopt a rule, a rule adopted under the re- 
pealed law is repealed as of the date the law is 
repealed. 

WTien an executive order abolishes part or all 
of an agency and transfers a function of that 
agency to another agency, a rule concerning the 
transferred function remains in effect until the 
agency to which the function is transferred 
amends or repeals the rule. When an executive 
order abolishes part or aU of an agency and does 
not transfer a function of that agency to another 
agency, a rule concerning a function abolished 
by the executive order is repealed as of the effec- 
tive date of the executive order. 

ITie Director of Fiscal Research of the General 
Assembly must notify the Codifier of Rules when 
a rule is repealed under this section. WTien no- 
tified of a rule repealed under this section, the 
Codifier of Rules must enter the repeal of the rule 
in the North Carolina Administrative Code. 

Part 3. Re\iew by Commission. 
§ 150B-21.8. Review of rule by Commission. 

(a) TemporaPv' Rule. -- The Commission does 
not review a temporary rule. 

(b) Permanent Rule. -- An agency must submit 
a permanent rule adopted by it to the Commis- 
sion before the rule can be included m the North 
Carolina Administrative Code. TTie Commission 
reviews a permanent rule in accordance \\ ith the 
standards in G.S. 150B-21.9 and follows the 
procedure in this Part in its review of a perma- 
nent rule. 

(c) Scope. -- WTien the Commission reviews 
an amendment to a rule, it may review the entire 
rule that is being amended. The procedure in 
G.S. 150B-21.12 applies when the Commission 
objects to a part of a rule that is within its scope 
of review but is not changed by a rule amend- 
ment. 

§ 150B-21.9. Standards and timetable for re- 
view by Commission. 

(a) Standards. -- The Commission must deter- 
mine whether a rule meets all of the following 
criteria: 



791 



6: 13 NOR TH CAR OLINA REGIS TER September 30, 1 991 



GENERAL STATUTES OF NORTH CAROLINA 



(1) It is within the authority delegated to the 
agency by the General Assembly. 

(2) It is clear and unambiguous. 

(3) It is reasonably necessary to fulfill a duty 
delegated to the agency by the General 
Assembly. 

The Commission may determine if a rule sub- 
mitted to it was adopted in accordance with Part 
2 of this /Vrticle. The Commission must notify 
the agency that adopted the rule if it determines 
that a rule was not adopted in accordance with 
Part 2 of this Article and must retum the rule to 
the agency. Entry of a rule in the North Carolina 
Administrative Code after review by the Com- 
mission is conclusive evidence that the rule was 
adopted in accordance with Part 2 of this Article. 

(b) Timetable. — The Commission must review 
a rule submitted to it on or before the twentieth 
of a month by the last day of the next month. 
The Commission must review a rule submitted 
to it after the twentieth of a month by the last 
day of the second subsequent month. 
§ I50B-21.10. Commission action on perma- 
nent rule. 

At the first meeting at which a permanent rule 
is before the Commission for review, the Com- 
mission must take one of the following actions: 

(1) Approve the rule, if the Commission de- 
termines that the rule meets the standards 
for review. 

(2) Object to the rule, if the Commission de- 
termines that the rule does not meet the 
standards for re\iew. 

(3) Extend the period for reviewing the rule, 
if the Commission determines it needs 
additional information on the rule to be 
able to decide whether the rule meets the 
standards for review. 

In reviewing a new rule or an amendment to an 
existing rule, the Commission may request an 
agency to make technical changes to the rule and 
may condition its approval of the rule on the 
agency's making the requested technical changes. 
§ 150B-21.il. Procedure when Commission 

approves permanent rule. 

When the Commission approves a permanent 
rule, it must notify the agency that adopted the 
rule of the Commission's approval and must de- 
liver the approved rule to the Codifier of Rules. 
The Commission must deliver an approved rule 
by the end of the month in which the Commis- 
sion approved the rule, unless the agency asks the 
Commission to delay the delivery of the rule. 
§ 150B-21.12. Procedure >vhen Commission 

objects to a permanent rule. 

(a) Action. -- When the Commission objects 
to a permanent rule, it must send the agency that 
adopted the rule a written statement of the ob- 



jection and the reason for the objection. The 
agency that adopted the rule must take one of the 
following actions: 

(1) Change the rule to satisfy the Commis- 
sion's objection and submit the revised 
rule to the Commission. 

(2) Submit a written response to the Com- 
mission indicating that the agency has de- 
cided not to change the rule. 

An agency that is not a board or commission 
must take one of these actions within 30 days 
after receiving the Commission's statement of 
objection. A board or commission must take 
one of these actions within 30 days after receiving 
the Commission's statement of objection or 
within 10 days after the board or commission's 
next regularly scheduled meeting whichever 
comes later. 

When an agency changes a rule in response to 
an objection by the Commission, the Commis- 
sion must determine whether the change satisfies 
the Commission's objection. If it does, the 
Commission must approve the rule. If it does 
not, the Commission must send the agency a 
written statement of the Commission's continued 
objection and the reason for the continued ob- 
jection. 

A rule to which the Commission has objected 
remains under review by the Commission until 
the agency that adopted the rule decides not to 
satisfy the Commission's objection and makes a 
written request to the Commission to retum the 
rule to the agency. When the Commission re- 
turns a rule to which it has objected, it may send 
to the President of the Senate and each member 
of the General Assembly a report of its objection 
to the rule. 

(b) Entry in Code. -- When the Commission 
returns a rule to which it has objected to the 
agency that adopted the rule, the Commission 
must notify the Codifier of Rules of its action 
and of the basis of the Commission's objection. 
An agency whose rule is returned may file the 
rule with the Codifier of Rules. When the 
Codifier of Rules enters in the North Carolina 
Administrative Code a rule to which the Com- 
mission objected, the entry must reflect the 
Commission's objection and must state the 
standard on which the Commission based its 
objection. 

§ I50B-21.I3. Procedure when Commission 
extends period for review of permanent rule. 

When the Commission extends the period for 
review of a permanent rule, it must notify the 
agency that adopted the rule of the extension and 
the reason for the extension. After the Com- 
mission extends the period for review of a rule, 
it may call a public hearing on the rule. Within 



6:U NORTH CAROLINA REGISTER September 30, 1991 



792 



GENERAL STATUTES OF NORTH CAROLINA 



70 days after extending the period for review of 
a rule, the Commission must decide whether to 
approve the rule, object to the rule, or call a 
public hearing on the rule. 
§ 150B-2I.I4. Public hearing on a rule. 

The Commission may call a public hearing on 
a rule when it extends the period for review of the 
rule. At the request of an agency, the Commis- 
sion may call a public hearing on a rule that is 
not before it for review. Calling a public hearing 
on a rule not already before the Commission for 
re\iew places the rule before the Commission for 
review. When the Commission decides to call a 
public hearing on a rule, it must publish notice 
of the public hearing in the North Carolina 
Register. 

After a pubUc hearing on a rule, the Commis- 
sion must approve the rule or object to the rule 
in accordance with the standards and procedures 
in this Part. The Commission must make its 
decision of whether to approve or object to the 
rule within 70 days after the public hearing. 
§ 150B-21.15. Declaratory judgment action 

authorized when Commission objects to a f)erma- 
ncnt rule. 

(a) Standing. -- A person aggrieved by a per- 
manent rule entered in the North Carolina Ad- 
ministrati\e Code with an objection by the 
Commission based on a lack of statutory" au- 
thority may fde an action for declaratory judg- 
ment in Wake County Superior Court pursuant 
to Article 26 of Chapter 1 of the General Stat- 
utes. In the action, the court shall determine 
whether the agency exceeded it authority ia 
adopting the rule. 

A declaratory judgment action under this sec- 
tion must be fded within 90 days after the rule 
that is the subject of the action is entered in the 
Code. Filing a petition for rule making or a re- 
quest for a declarator)' ruling with the agency that 
adopted the rule is not a prerequisite to fding an 
action under this section. A person who fdes an 
action for declaratory judgment under this sec- 
tion must ser\'e a copy of the complaint on the 
agency that adopted the rule being contested, the 
Codifier of Rules, and the Commission. 

(b) Record. - Within 10 days after a 
declaratory judgment action is filed under this 
section, the agency that adopted the rule that is 
the subject of the action must send to the court 
the original or a certified copy of the record in the 
Commission's re\iew of the rule. The record 
consists of the rule, the Commission's letter of 
objection to the rule, the agency's written re- 
sponse to the Commission's letter, and any other 
relevant documents before the Commission when 
it decided to object to the rule. 



(c) Effect. — A rule remains in effect during the 
pendency of an action for declaratory judgment 
under this section unless the court suspends the 
rule after fmding that the agency that adopted the 
rule has no substantial likelihood of prevailing in 
the action. 

(d) Changes. -- While a rule is the subject of a 
declaratory judgment action under this section, 
the agency that adopted the rule may submit to 
the Commission changes in the rule to satisfy the 
Commission's objection. If the Commission 
determines that changes submitted to it satisfy its 
objection, the Commission must accept the 
changes and file the revised rule with the Codifier 
of Rules. The Codifier must then enter the rule 
in the North Carolina Administrative Code. 
WTien the Commission determines that changes 
submitted to it satisfy its objection, the agency 
that submitted the changes must notify the court 
of the changes and of the Commission's action. 

Part 4. Publication of Code and Register. 
§ 150B-21.17. North Carolina Register. 

(a) Content. -- The Codifier of Rules must 
publish the North Carolina Register. The North 
Carolina Register must be published at least two 
times a month and must contain the following: 

(1) Notices of proposed adoptions of rules. 

(2) Notices of receipt of a petition for munic- 
ipal incorporation, as required bv G.S. 
120-165. 

(3) Executive orders of the Governor. 

(4) l-'inal decision letters from the United 
States Attorney General concerning 
changes in laws that affect voting in a ju- 
risdiction subject to § 5 of the Voting 
Rights Act of 1965, as required by G.S. 
120-30.911. 

(5) Orders of the Tax Review Board issued 
under G.S. 105-241.2. 

(6) Other information the Codifier determines 
helpful to the pubhc. 

(b) Eorm. -- When an agency publishes notice 
in the North Carolina Register of the proposed 
text of a new rule, the Codifier of Rules must 
pubhsh the complete text of the proposed new 
rule. In publishing the text of a proposed new 
rule, the Codifier must indicate the rule is new 
by underlining the proposed text of the rule. 

When an agency publishes notice in the North 
Carolina Register of the proposed text of an 
amendment to an existing rule, the Codifier must 
publish the complete text of the rule that is being 
amended unless the Codifier determines that 
publication of the complete text of the rule being 
amended is not necessary to enable the reader to 
understand the proposed amendment. In pub- 
lishing the text of a proposed amendment to a 



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GENERAL ST A TUTES OF NORTH CAROLINA 



rule, the Codifier must indicate deleted text with 
overstrikes and added text with underlines. 

When an agency publishes notice in the North 
Carolina Register of the proposed repeal of an 
existing rule, the Codifier must publish the com- 
plete text of the rule the agency proposes to re- 
peal unless the Codifier determines that 
publication of the complete text is impractical. 
In publishing the text of a rule the agency pro- 
poses to repeal, the Codifier must indicate the 
rule is to be repealed. 

§ 150B-21.18. North Carolina Administrative 
Code. 

The Codifier of Rules must compile all rules 
into a Code known as the North Carolina Ad- 
ministrative Code. The format and indexing of 
the Code must conform as nearly as practical to 
the format and indexing of the North Carolina 
General Statutes. The Codifier must publish 
printed copies of the Code and may pubhsh the 
Code in other forms. The Codifier must keep 
the Code current by publishing the Code in a 
loose-leaf format and periodically providing new 
pages to be substituted for outdated pages, by 
publishing the Code in volumes and periodically 
pubhshing cumulative supplements, or by an- 
other means. The Codifier must keep superseded 
rules. 

§ 150B-21.19. Requirements for Including rule 
in Code. 

To be acceptable for inclusion in the North 
Carolina Administrative Code, a rule must: 

(1) Cite the law under which the rule is 
adopted. 

(2) Be signed by the head of the agency or the 
rule-making coordinator for the agency 
that adopted the rule. 

(3) Be in the physical form specified by the 
Codifier of Rules. 

(4) flave been reviewed by the Commission, 
if the rule is a permanent rule. 

§ 150B-21.20. Codifier's authority to revise 

form of rules. 

(a) Authority. -- After consultmg with the 
agency that adopted the rule, the Codifier of 
Rules may revise the form of a rule submitted for 
inclusion in the North Carolina Administrative 
Code within 10 business days after the rule is 
submitted to do one or more of the foUowing: 

(1) Rearrange the order of the rule in the 
Code or the order of the subsections, su- 
bdivisions, or other subparts of the rule. 

(2) Provide a catch line or heading for the rule 
or revise the catch line or heading of the 
rule. 

(3) Reletter or renumber the rule or the sub- 
parts of the rule in accordance with a 
uniform svstem. 



(4) Rearrange definitions and lists. 

(5) Make other changes in arrangement or in 
form that do not change the substance of 
the rule and are necessary or desirable for 
a clear and orderly arrangement of the 
rule. 

(b) Effect. -- Revision of a rule by the Codifier 
of Rules under this section does not affect the 
effective date of the rule or require the agency to 
readopt or resubmit the rule. When the Codifier 
of Rules revises the foim of a rule the Codifier 
of Rules must send the agency that adopted the 
rule a copy of the revised rule. The revised rule 
is the official rule. 

§ 150B-2I.21. Publication of rules of North 
Carolina State Bar and exempt agencies. 

(a) State Bar. — The North Carolina State Bar 
must submit a rule adopted or approved by it 
and entered in the minutes of the North Carolina 
Supreme Court to the Codifier of Rules for 
inclusion in the North Carolina Administrative 
Code. The State Bar must submit a rule within 
15 days after it is entered in the minutes of the 
Supreme Court. The Codifier of Rules must 
compile, make available for pubhc inspection, 
and publish a rule included in the North Carolina 
Administrative Code under this subsection in the 
same manner as other rules in the Code. 

(b) Exempt Agencies. -- Notwithstanding G.S. 
150B-1, the North Carolina L'tifities Commis- 
sion must submit to the Codifier of Rules those 
rules of the Utilities Commission that are pub- 
lished from time to time in the pubhcation titled 
"North Carolina Utilities Laws and 
Regulations." The Utihties Commission must 
submit a rule required to be included in the Code 
within 15 days after it is adopted. The Codifier 
of Rules must pubhsh the rules submitted by the 
Utilities Commission in the North Carolina Ad- 
ministrative Code in the same format as they are 
submitted. 

Notwithstanding G.S. 150B-1, an agency other 
than the Utihties Commission that is exempted 
from this .Article by that statute must submit a 
temporary or permanent rule adopted by it to the 
Codilier of Rules for inclusion in the North 
Carohna Administrative Code. One of these ex- 
empt agencies must submit a rule to the Codifier 
of Rules within 15 days after it adopts the rule. 
The Codifier of Rules must compile, make 
available for pubhc inspection, and pubhsh a rule 
of one of these agencies in the North Carolina 
Administrative Code in the same manner as 
other rules in the Code. 
§ 1508-21.22. Effect of inclusion in Code. 

Official or judicial notice can be taken of a rule 
in the North Carolina Administrative Code and 
shall be taken when appropriate. Codification 



6:li NORTH CAROLINA REGISTER September 30, 1 991 



794 



GENERAL ST A TUTES OF NORTH CAROLINA 



of a rule in the North Carolina Administrative 
Code 15 prima facie evidence of compliance with 
this .Article. 
§ 150B-21.23. Rule publication manual. 

Ihe Codifier of Rules must publish a manual 
that sets out the form and method for publishing 
a notice of rule making in the North Carolina 
Register and for filing a rule in the North 
Carolina Administrative Code. 
§ I50B-21.24. Free copies of Register and 

Code. 

(a) Register. -- The Codifier of Rules must 
distribute copies of the North Carolina Register 
as soon after publication as practical, without 
charge, to the following: 

( 1 ) A person who receives a free copy of the 
North Carolina Administrative Code, 

(2) Upon request, one copy to each member 
of the General Assembly, 

(b) Code. -- The Codifier of Rules must dis- 
tribute copies of the North Carolina Administra- 
tive Code as soon after pubhcation as practical, 
without charge, to the following: 

(1) One copy to the board of commissioners 
of each county, to be placed at the county 
clerk of court's office or at another place 
selected by the board of commissioners, 

(2j One copy to the Commission. 

(3) One copy to the Clerk of the Supreme 
Court and to the Clerk of the Court of 
Appeals of North Carolina, 

(4) One copy to the Supreme Court Library^ 
and one copy to the library of the Court 
of Appeals. 

(5) One copy to the Admimstrative Office of 
the Courts. 

(6) One copy to the Govemor. 

(7) Five copies to the Legislati\'e Services 
Commission for the use of the General 
Assembly. 

(8) Upon request, one copy to each State of- 
ficial or department to whom or to w hich 
copies of the appellate division reports are 
furnished under G.S. 7A-343,1, 

(9) Fi\'e copies to the Division of State Li- 
brary,' of the Department of Cultural Re- 
sources pursuant to G.S. 125-11.7. 

§ 150B-21.25. Paid copies of Register and 

Code. 
A person who is not entitled to a free copy of 
the North Carolina Administrative Code or 
North Carolina Register may obtain a copy by 
paying a fee set by the Codifier of Rules. The 
Coditier must set separate fees for the North 
Carolina Register and the North Carolina Ad- 
ministrative Code in amounts that cover publi- 
cation, copying, and mailing costs, .AH monies 



received under this section must be credited to 
the General Fund, 

Article 3. 
.Administrative Hearings. 
§ 1508-22. Settlement; contested case. 

It is the policy of this State that any dispute 
between an agency and another person that in- 
volves the person's rights, duties, or privileges, 
including licensing or the le\'y of a monetarv' 
penalty, should be settled through informal pro- 
cedures. In trying to reach a settlement through 
informal procedures, the agency may not conduct 
a proceeding at which sworn testimony is taken 
and witnesses may be cross-examined. If the 
agency and the other person do not agree to a 
resolution of the dispute through informal pro- 
cedures, either the agency or the person may 
commence an administrative proceeding to de- 
termine the persons rights, duties, or privileges, 
at which time the dispute becomes a "contested 
case," 

§ 150B-23. Commencement; assignment of 

administrative law judge; hearing required; notice; 
intenention. 

(a) A contested case shall be commenced by 
filing a petition with the Office of .Administrative 
Heanngs and, except as provided in .Article 3A 
of this Chapter, shall be conducted by that Of- 
fice, The party who files the petition shall ser%'e 
a copy of the petition on all other parties and, if 
the dispute concerns a license, the person who 
holds the license, A party who files a petition 
shall file a certificate of service together with the 
petition, A petition shall be signed by a party 
or a representative of the party and, if filed by a 
party other than an agency, shall state facts 
tending to establish that the agency named as the 
respondent has deprived the petitioner of prop- 
erty, has ordered the petitioner to pay a fine or 
ci\il penalty, or has otherwise substantially prej- 
udiced the petitioner's nghts and that the agency: 

(1) Exceeded its authority or jurisdiction; 

(2) .Acted erroneously; 

(3) Failed to use proper procedure: 

(4) .Acted arbitrarily or capriciously: or 

(5j Failed to act as required by law"^or rule. 
The parties in a contested case shall be gi\en an 
opportunity for a hearing without undue delay, 
.Any person aggrie\ed may commence a con- 
tested case hereunder, 

A local goverimient employee, applicant for 
employment, or former employee to whom 
Chapter 126 of the General Statutes appHes may 
commence a contested case under this .Article in 
the same manner as any other petitioner. The 
case shall be conducted in the Office of Admin- 
istrative Hearings in the same manner as other 
contested cases under this .Article, except that the 



795 



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GENERAL ST A TUTES OF NORTH CAROLINA 



decision of the State Personnel Commission shall 
be advisor\' only and not binding on the local 
appointing authority, unless (1) the employee, 
apphcant, or former employee has been subjected 
to discrimination prohibited by Article 6 of 
Chapter 126 of the General Statutes or (2) ap- 
plicable federal standards require a binding deci- 
sion. In these two cases, the State Personnel 
Commission's decision shall be binding. 

(al) Repealed by Session Laws 1985 (Reg. 
Sess., 1986), c. 1022, s. 1(9), effective July 15, 
1986. 

(a2) An administrative law judge assigned to a 
contested case may require a party to the case to 
file a prehearing statement. A party's prehearing 
statement must be ser\'ed on all other parties to 
the contested case. 

(b) The parties to a contested case shall be 
given a notice of hearing not less than 15 days 
before the hearing by the Office of Administrative 
Hearings. If prehearing statements have been 
filed in the case, the notice shall state the date, 
hour, and place of the hearing. If prehearing 
statements have not been filed in the case, the 
notice shall state the date, hour, place, and nature 
of the hearing, shall list the particular sections of 
the statutes and rules involved, and shall give a 
short and plain statement of the factual 
allegations. 

(c) Notice shall be given personally or by cer- 
tified mail. If given by certified mail, it shall be 
deemed to have been given on the dchvery date 
appearing on the return receipt. If giving of no- 
tice cannot be accomplished cither personally or 
by certified mail, notice shall then be given in the 
manner provided in G.S. lA-1, Rule 4(jl). 

(d) Any person may petition to become a party 
by filing a motion to intervene in the manner 
provided in G.S. lA-1, Rule 24. In addition, any 
person interested in a contested case may inter- 
vene and participate in that proceeding to the 
extent deemed appropriate by the administrative 
law judge. 

(e) /Ml hearings under this Chapter shall be 
open to the public. Hearings shall be conducted 
in an impartial manner. Hearings shall be con- 
ducted according to the procedures set out in this 
Article, except to the extent and in the particulars 
that specific hearing procedures and time stand- 
ards are governed by another statute. 

(f) Unless another statute or a federal statute 
or regulation sets a time limitation for the filing 
of a petition in contested cases against a specified 
agency, the general Umitation for the filing of a 
petition in a contested case is 60 days. The time 
limitation, whether estabhshed by another stat- 
ute, federal statute, or federal regulation, or this 
section, shall commence when notice is given of 



the agency decision to all persons aggrieved who 
are known to the agency by personal delivery or 
by the placing of the notice in an official deposi- 
tory of the United States Postal Service wrapped 
in a wrapper addressed to the person at the latest 
address given by the person to the agency. The 
notice shall be in writing, and shall set forth the 
agency action, and shall inform the persons of the 
right, the procedure, and the time limit to file a 
contested case petition. When no informal 
settlement request has been received by the 
agency prior to issuance of the notice, any sub- 
sequent informal settlement request shall not 
suspend the time limitation for the fUing of a pe- 
tition for a contested case hearing. 
§ 150B-24. Venue of hearing. 

(a) The hearing of a contested case shall be 
conducted: 

(1) In the county in this State in which any 
person whose property or rights are the 
subject matter of the hearing maintains 
his residence; 

(2) In the county where the agency maintains 
its principal office if the property or rights 
that are the subject matter of the hearing 
do not affect any person or if the subject 
matter of the hearing is the property or 
rights of residents of more than one 
county; or 

(3) In any county determined by the admin- 
istrative law judge in his discretion to 
promote the ends of justice or better serve 
the convenience of witnesses. 

(b) Any person whose property or rights are 
the subject matter of the hearing waives his ob- 
jection to venue by proceeding in the hearing. 

§ 150B-25. Conduct of hearing; answer. 

(a) If a party fails to appear in a contested case 
after proper service of notice, and if no 
adjournment or continuance is granted, the ad- 
ministrative law judge may proceed with the 
hearing in the absence of the party. 

(b) Repealed. 

(c) The parties shall be given an opportunity 
to present arguments on issues of law and poUcy 
and an opportunity to present evidence on issues 
of fact . 

(d) A party may cross-examine any witness, 
including the author of a document prepared by, 
on behalf of or for use of the agency and offered 
in evidence. Any party may submit rebuttal ev- 
idence. 

§ 150B-26. Consolidation. 
When contested cases involving a common 
question of law or fact or multiple proceedings 
involving the same or related parties are pending, 
the Director of the Office of Administrative 
Hearings may order a joint hearing of any mat- 



6:li NORTH CAROLINA REGISTER September 30, 1991 



796 



GENERAL ST A TUTES OF NORTH CAROLINA 



ters at issue in the cases, order the cases consol- 
idated, or make other orders to reduce costs or 
delay in the proceedings. 
§ 1508-27. Subpoena. 
After the commencement of a contested case, 
subpoenas may be issued and served in accord- 
ance with G.S. lA-1, Rule 45. In addition to the 
methods of sen'ice in G.S. IA-1, Rule 45, a State 
law enforcement officer may serve a subpoena 
on behalf of an agency that is a party to the 
contested case by any method by which a sheriff 
may ser\e a subpoena under that Rule. Upon a 
motion, the administrative law judge may quash 
a subpoena if upon a hearing, the administrative 
law judge fmds that the evidence the production 
of which is required does not relate to a matter 
in issue, the subpoena does not describe with 
sufficient particularity the evidence the pro- 
duction of which is required, or for any other 
reason sufficient in law the subpoena may be 
quashed. Witness fees shall be paid by the party 
requesting the subpoena to subpoenaed witnesses 
in accordance with G.S. 7A-314. However, State 
officials or employees who are subpoenaed shall 
not be entitled to witness fees, but they shall re- 
ceive their normal salary and they shall not be 
required to take any annual leave for the witness 
days. Travel expenses of State officials or em- 
ployees who are subpoenaed shall be reimbursed 
as provided m G.S. 138-6. 
§ 1 SOB- 28. Depositions and discoven'. 

(a) A deposition may be used in lieu of other 
evidence when taken in comphance with the 
Rules of Civil Procedure, G.S. lA-1. Parties in 
contested cases may engage in discovery pursuant 
to the provisions of the Rules of Civil Procedure, 
G.S. lA-1. 

(b) On a request for identifiable agency records, 
with respect to material facts involved in a con- 
tested case, except records related solely to the 
mtemal procedures of the agency or which are 
exempt from disclosure by law, an agency shall 
promptly make the records available to a party. 

§ 150B-29. Rules of evidence. 

(a) In all contested cases, irrelevant, immaterial 
and unduly repetitious evidence shall be ex- 
cluded. Except as otherwise provided, the rules 
of evidence as applied in the trial division of the 
General Court of Justice shall be followed; but, 
when evidence is not reasonably available under 
the rules to show relevant facts, then the most 
reliable and substantial evidence available shall 
be admitted. On the judge's own motion, an 
administrative law judge may exclude evidence 
that is inadmissible under this section. It shall 
not be necessary for a party or his attorney to 
object at the hearing to evidence in order to pre- 
ser\'e the right to object to its consideration by 



the administrative law judge in making a recom- 
mended decision, by the agency in making a fmal 
decision, or by the court on judicial review. 

(b) Evidence in a contested case, including re- 
cords and documents, shall be offered and made 
a part of the record. Factual information or ev- 
idence not made a part of the record shall not be 
considered in the determination of the case, ex- 
cept as permitted under G.S. 1508-30. Docu- 
mentary evidence may be received in the form of 
a copy or excerpt or may be incorporated by 
reference, if the materials so incorporated are 
available for examination by the parties. Upon 
timely request, a party shall be given an oppor- 
tunity to compare the copy with the original if 
available. 
§ 1508-30. Omcial notice. 

Official notice may be taken of all facts of which 
judicial notice may be taken and of other facts 
within the specialized knowledge of the agency. 
The noticed fact and its source shall be stated and 
made known to affected parties at the earliest 
practicable time, and any party shall on timely 
request be afforded an opportunity to dispute the 
noticed fact through submission of evidence and 
argument. 
§ 1508-31. Stipulations. 

(a) The parties in a contested case may, by a 
stipulation in writing filed with the administrative 
law judge, agree upon any fact involved in the 
controversy, which stipulation shall be used as 
evidence at the hearing and be binding on the 
parties thereto. Parties should agree upon facts 
when practicable. 

(b) Except as otherwise provided by law, dis- 
position may be made of a contested case by 
stipulation, agreed settlement, consent order, 
waiver, default, or other method agreed upon by 
the parties. 

§ 1508-32. Designation of administrative law 
judge. 

(a) The Director of the Office of Administrative 
Hearings shall assign himself or another admin- 
istrative law judge to preside over a contested 
case. 

(b) On the filing in good faith by a party of a 
timely and sufficient affidavit of personal bias or 
disqualification of an administrative law judge, 
the administrative law judge shall determine the 
matter as a part of the record in the case, and this 
determination shall be subject to judicial review 
at the conclusion of the proceeding. 

(c) WTien an administrative law judge is dis- 
qualified or it is impracticable for him to con- 
tinue the hearing, the Director shall assign 
another administrative law judge to continue 
with the case unless it is shown that substantial 
prejudice to any party will result, in which event 



797 



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GENERAL ST A TUTES OF NORTH CAROLINA 



a new hearing shall be held or the case dismissed 

without prejudice. 

§ I50B-33. Powers of administrative law 

judge. 

(a) An administrative law judge shall stay any 
contested case under this Article on motion of 
an agency which is a party to the contested case, 
if the agency shows by supporting cdTidavits that 
it is engaged in other litigation or administrative 
proceedings, by whatever name called, with or 
before a federal agency, and this other litigation 
or administrative proceedings will determine the 
position, in whole or in part, of the agency in the 
contested case. At the conclusion of the other 
litigation or administrative proceedings, the con- 
tested case shall proceed and be determined as 
expeditiously as possible. 

(b) An administrative law judge may: 

(1) Administer oaths and affumations; 

(2) Sign, issue, and rule on subpoenas in ac- 
cordance with G.S. 150B-27 and G.S. 
lA-1, Rule 45; 

(3) Provide for the taking of testimony by 
deposition and rule on all objections to 
discovery in accordance with G.S. lA-1, 
the Rules of Civil Procedure; 

(3a) Rule on all prehearing motions that are 
authorized by G.S. lA-1, the Rules of 
Civd Procedure; 

(4) Regulate the course of the hearings, in- 
cluding discovery, set the time and place 
for continued hearings, and fix the time 
for filing of briefs and other documents; 

(5) Direct the parties to appear and confer to 
consider simplification of the issues by 
consent of the parties; 

(6) Stay the contested action by the agency 
pending the outcome of the case, upon 
such terms as he deems proper, and sub- 
ject to the provisions of G.S. lA-1, Rule 
65; 

(7) Determine whether the hearing shaU be 
recorded by a stenographer or by an elec- 
tronic device; and 

(8) Enter an order returnable in the General 
Court of Justice, Superior Court Division, 
to show cause why the person should not 
be held in contempt. The Court shall 
have the power to impose punishment as 
for contempt for any act which would 
constitute direct or indirect contempt if 
the act occurred in an action pending in 
Superior Court. 

(9) Determine that a rule as apphed in a 
particular case is void because (1) it is not 
within the statutory authority of the 
agency, (2) is not clear and unambiguous 
to persons it is intended to direct, guide. 



or assist, or (3) is not reasonably necessary 
to enable the agency to fulfill a duty de- 
legated to it by the General Assembly. 
(10) Impose the sanctions provided for in G.S. 
1 A- 1 or Chapter 3 of Title 26 of the North 
Carolina Administrative Code for non- 
comphance with applicable procedural 
rules. 

§ 150B-34. Recommended decision or order 

of administrative law judge. 

(a) Except as provided in G.S. 150B-36(c), in 
each contested case the administrative law judge 
shall make a recommended decision or order that 
contains fmdings of fact and conclusions of law. 

(b) Repealed. 

§ 1 SOB- 35. No ex parte communication; ex- 
ceptions. 

Unless required for disposition of an ex parte 
matter authorized by law, neither the adminis- 
trative law judge assigned to a contested case nor 
a member or employee of the agency making a 
fmal decision in the case may communicate, di- 
rectly or indirectly, in cormection with any issue 
of fact, or question of law, with any person or 
party or his representative, except on notice and 
opportunity for all parties to participate. 
§ 1 SOB- 36. Final decision. 

(a) Before the agency makes a fmal decision, it 
shall give each party an opportunity to fde ex- 
ceptions to the decision recommended by the 
administrative law judge, and to present written 
arguments to those in the agency who will make 
the final decision or order. If a party files in good 
faith a timely and sufficient affidavit of personal 
bias or other reason for disqualification of a 
member of the agency making the fmal decision, 
the agency shall determine the matter as a part 
of the record in the case, and the determination 
is subject to judicial review at the conclusion of 
the case. 

(b) A fmal decision or order in a contested case 
shall be made by the agency in writing after re- 
view of the official record as defmed in G.S. 
150B-37(a) and shall include fmdings of fact and 
conclusions of law. If the agency does not adopt 
the administrative law judge's recommended de- 
cision as its fmal decision, the agency shall state 
in its decision or order the specific reasons why 
it did not adopt the administrative law judge's 
recorTm:iended decision. The agency may con- 
sider only the official record prepared pursuant 
to G.S. 150B-37 in making a fmal decision or 
order, and the final decision or order shall be 
supported by substantial evidence admissible un- 
der G.S. 150B-29(a), 150B-30, or 150B-31. A 
copy of the decision or order shall be served 
upon each party personally or by certified mail 
addressed to the party at the latest address given 



6:13 NORTH CAROLINA REGISTER September 30, 1991 



798 



GENERAL ST A TUTES OF NORTH CAROLINA 



by the party to the agency, and a copy shall be 
furnished to his attorney of record and the Office 
of Administrative Hearings. 

(c) 1 he following decisions made by adminis- 
trative law judges in contested cases are fmal de- 
cisions: 

(1) A determination that the Office of Ad- 
ministrative Hearings lacks junsdiction. 

(2) An order entered pursuant to the authority 
in G.S. 7A-759(e). 

(3) An order entered pursuant to a written 
prehearing motion that either dismisses 
the contested case for failure of the 
petitioner to prosecute or grants the rehef 
requested when a party does not comply 
with procedural requirements. 

(4) An order entered pursuant to a prehearing 
motion to dismiss the contested case in 
accordance with G.S. lA-1, Rule 12(b) 
v\hen the order disposes of all issues in the 
contested case. 

§ 15(»B-37. Omcial record. 

(a) In a contested case, the Office of Adminis- 
trative Hearings shall prepare an official record 
of the case that includes: 

(1) Notices, pleadings, motions, and interme- 
diate rulings; 

(2) Questions and offers of proof, objections, 
and rulings thereon; 

(3) Evidence presented; 

(4) Matters officially noticed, except matters 
so obvious that a statement of them 
would serve no useful purpose; and 

(5) The administrative law judge's recom- 
mended decision or order. 

(b) Proceedings at which oral evidence is pre- 
sented shall be recorded, but need not be tran- 
scribed unless requested by a party. Each party 
shall bear the cost of the transcript or part thereof 
or copy of said transcript or part thereof which 
said party requests, and said transcript or part 
thereof shall be added to the official record as an 
exhibit. 

(c) The Office of Administrative Hearings shall 
forward a copy of the official record to the agency 
making the final decision and shall forward a 
copy of the recommended decision to each party. 

Article 3A. 
Other Administrative Hearings. 
§ I50B-38. Scope; required; notice; venue. 

(a) The provisions of this Article shall apply to 
the following agencies: 

(1) Occupational licensing agencies; 

(2) The State B;mking Commission, the 
Commissioner of Banks, the Savings In- 
stitutions Division of the Department of 
Economic and Community Development, 
and the Credit Union Division of the De- 



partment of Economic and Community 
Development; and 
(3) The Department of Insurance and the 
Commissioner of Insurance. 

(b) Prior to any agency action in a contested 
case, the agency shall give the parties in the case 
an opportunity for a hearing without undue delay 
and notice not less than 15 days before the hear- 
ing. Notice to the parties shall include: 

(1) A statement of the date, hour, place, and 
nature of the hearing; 

(2) A reference to the particular sections of the 
statutes and rules involved; and 

(3) A short and plain statement of the facts 
alleged. 

(c) Notice shall be given personally or by cer- 
tified mail. If given by certified mail, notice shall 
be deemed to have been given on the delivery 
date appearing on the return receipt. If notice 
cannot be given personally or by certified mail, 
then notice shall be given in the manner provided 
in G.S. lA-1, Rule4(jr). 

(d) A party who has been served with a notice 
of hearing may file a written response with the 
agency. If a written response is filed, a copy of 
the response must be mailed to all other parties 
not less than 10 days before the date set for the 
hearing. 

(e) /Ml hearings conducted under this /Vrticle 
shall be open to the public. A hearing conducted 
by the agency shall be held in the county where 
the agency maintains its principal office. A 
hearing conducted for the agency by an adminis- 
trative law judge requested under G.S. 150B-40 
shall be held in a county in this State where any 
person whose property or rights are the subject 
matter of the hearing resides. If a different venue 
would promote the ends of justice or better serve 
the convenience of witnesses, the agency or the 
administrative law judge may designate another 
county. A person whose property or rights are 
the subject matter of the hearing waives his ob- 
jection to venue if he proceeds in the hearing. 

(f) Any person may petition to become a party 
by filing with the agency or hearing officer a 
motion to intervene in the manner provided by 
G.S. lA-1, Rule 24. In addition, any person in- 
terested in a contested case under this Article 
may intervene and participate to the extent 
deemed appropriate by the agency hearing offi- 
cer. 

(g) When contested cases involving a common 
question of law or fact or multiple proceedings 
involving the saine or related parties are pending 
before an agency, the agency may order a joint 
hearing of any matters at issue in the cases, order 
the cases consolidated, or m;ike other orders to 
reduce costs or delay in the proceedings. 



799 



6:13 NORTH CAROLINA REGISTER September 30, 1991 



GENERAL ST A TUTES OF NORTH CAROLINA 



(h) Every agency shall adopt rules governing 
the conduct of hearings that are consistent with 
the provisions of this Article. 
§ 1 SOB- 39. Depositions; discovery; subpoenas. 

(a) A deposition may be used in lieu of other 
evidence when taken in compliance with the 
Rules of Civil Procedure, G.S. lA-1. Parties in 
a contested case may engage in discovery pursu- 
ant to the provisions of the Rules of Civil Pro- 
cedure, G.S. lA-1. 

(b) Upon a request for an identifiable agency 
record involving a material fact in a contested 
case, the agency shall promptly provide the re- 
cord to a party, unless the record relates solely to 
the agency's internal procedures or is exempt 
from disclosure by law. 

(c) In preparation for, or in the conduct of, a 
contested case subpoenas may be issued and 
served in accordance with G.S. lA-1, Rule 45. 
Upon a motion, the agency may quash a 
subpoena if, upon a hearing, the agency finds 
that the evidence, the production of which is re- 
quired, does not relate to a matter in issue, the 
subpoena does not describe with sufficient 
particularity the evidence the production of 
which is required, or for any other reason suffi- 
cient in law the subpoena may be quashed. 
Witness fees shall be paid by the party requesting 
the subpoena to subpoenaed witnesses in ac- 
cordance with G.S. 7A-314. However, State of- 
ficials or employees who are subpoenaed shall 
not be entitled to any witness fees, but they shall 
receive their normal salary' and they shall not be 
required to take any annual leave for the witness 
days. Travel expenses of State officials or em- 
ployees who are subpoenaed shall be reimbursed 
as provided in G.S. 138-6. 

§ 150B-40. Conduct of hearing; presiding of- 
ficer; ex parte communication. 

(a) Hearings shall be conducted in a fair and 
impartial manner. At the hearing, the agency 
and the parties shall be given an opportunity to 
present evidence on issues of fact, examine and 
cross-examine witnesses, including the author of 
a document prepared by, on behalf of or for the 
use of the agency and offered into evidence, sub- 
mit rebuttal evidence, and present arguments on 
issues of law or pohcy. 

If a party fails to appear in a contested case after 
he has been given proper notice, the agency may 
continue the hearing or proceed with the hearing 
and make its decision in the absence of the party. 

(b) Except as provided under subsection (e) of 
this section, hearings under this Article shall be 
conducted by a majority of the agency. An 
agency shall designate one or more of its mem- 
bers to preside at the hearing. If a party files in 
good faith a timely and sufficient affidavit of the 



personal bias or other reason for disqualification 
of any member of the agency, the agency shall 
determine the matter as a part of the record in the 
case, and its determination shall be subject to 
judicial review at the conclusion of the proceed- 
ing. If a presiding officer is disqualified or it is 
impracticable for him to continue the hearing, 
another presiding officer shall be assigned to 
continue with the case, except that if assignment 
of a new presiding officer will cause substantial 
prejudice to any party, a new hearing shall be 
held or the case dismissed without prejudice. 

(c) The presiding officer may: 

(1) Administer oaths and affirmations; 

(2) Sign and issue subpoenas in the name of 
the agency, requiring attendance and giv- 
ing of testimony by witnesses and the 
production of books, papers, and other 
documentary evidence; 

(3) Provide for the taking of testimony by 
deposition; 

(4) Regulate the course of the hearings, set the 
time and place for continued hearings, and 
fix the time for filing of briefs and other 
documents; 

(5) Direct the parties to appear and confer to 
consider simplification of the issues by 
consent of the parties; and 

(6) Apply to any judge of the superior court 
resident in the district or presiding at a 
term of court in the county where a hear- 
ing is pending for an order to show cause 
why any person should not be held in 
contempt of the agency and its processes, 
and the court shall have the power to im- 
pose punishment as for contempt for acts 
which would constitute direct or indirect 
contempt if the acts occurred in an action 
pending in superior court. 

(d) Unless required for disposition of an ex 
parte matter authorized by law, a member of an 
agency assigned to make a decision or to make 
fmdings of fact and conclusions of law in a con- 
tested case under this Article shall not commu- 
nicate, directly or indirectly, in connection with 
any issue of fact or question of law, with any 
person or party or his representative, except on 
notice and opportunity for all parties to partic- 
ipate. Ihis prohibition begins at the time of the 
notice of hearing. An agency member may 
communicate with other members of the agency 
and may have the aid and advice of the agency 
staff other than the staff which has been or is 
engaged in investigating or prosecuting functions 
in connection with the case under consideration 
or a factually-related case. This section does not 
apply to an agency employee or party represen- 
tative with professional training in accounting. 



6:13 NORTH CAROLINA REGISTER September 30. 1 99 1 



800 



GENERAL ST A TUTES OF NORTH CAROLINA 



actuarial science, economics or financial analysis 
insofar as the case involves financial practices or 
conditions. 

(e) WTien a majority of an agency is unable or 
elects not to hear a contested case, the agency 
shall apply to the Director of the Office of Ad- 
ministrative Hearings for the designation of an 
administrative law judge to preside at the hearing 
of a contested case under this ^Vrticle. Upon re- 
ceipt of the application, the Director shall, with- 
out undue delay, assign an administrative law- 
judge to hear the case. 

The provisions of this Article, rather than the 
provisions of Article 3, shall govern a contested 
case in which the agency requests an administra- 
tive law judge from the Office of Administrative 
Hearings. 

The administrative law judge assigned to hear a 
contested case under this .Article shall sit in place 
of the agency and shall have the authority of the 
presiding officer in a contested case under this 
.Article. The administrative law judge shall make 
a proposal for decision, which shall contain pro- 
posed fmdings of fact and proposed conclusions 
of law. 

An administrative law judge shall stay any con- 
tested case under this Article on motion of an 
agency which is a party to the contested case, if 
the agency shows by supporting affidavits that it 
is engaged in other htigation or administrati\e 
proceedings, by whatever name called, with or 
before a federal agency, and this other litigation 
or administrative proceedings will determine the 
position, in whole or in part, of the agency in the 
contested case. At the conclusion of the other 
litigation or administrative proceedings, the con- 
tested case shall proceed and be determined as 
expeditiously as possible. 

The agency may make its fmal decision only 
after the administrative law judge's proposal for 
decision is sened on the parties, and an oppor- 
tunity is given to each party to file exceptions and 
proposed fmdings of fact and to present oral and 
written arguments to the agency. 
§ 150B-41. Evidence; stipulations; official no- 
tice. 

(a) In all contested cases, irrelevant, immaterial, 
and unduly repetitious e\'idence shall be ex- 
cluded. Except as otherwise provided, the rules 
of evidence as applied in the trial division of the 
General Court of Justice shall be followed; but, 
when evidence is not reasonably available under 
such rules to show rele\ant facts, they may be 
shown by the most reliable and substantial evi- 
dence available. It shall not be necessary for a 
party or his attorney to object to evidence at the 
hearing in order to preser\'e the right to object to 



its consideration by the agency in reaching its 
decision, or by the court of judicial review. 

(b) Evidence in a contested case, including re- 
cords and documents shall be offered and made 
a part of the record. Other factual information 
or e\idence shall not be considered in determi- 
nation of the case, except as permitted under 
G.S. 150B-30. Documentary evidence may be 
received in the form of a copy or excerpt or may 
be incorporated by reference, if the materials so 
incorporated are available for examination by the 
parties. Upon timely request, a party shall be 
given an opportunity to compare the copy with 
the original if available. 

(c) The parties in a contested case under this 
Article by a stipulation in writing fded with the 
agency may agree upon any fact involved in the 
controversy, which stipulation shall be used as 
evidence at the hearing and be binding on the 
parties thereto. Parties should agree upon facts 
when practicable. Except as otherwise provided 
by law, disposition may be made of a contested 
case by stipulation, agreed settlement, consent 
order, waiver, default, or other method agreed 
upon by the parties. 

(d) Official notice may be taken of all facts of 
which judicial notice may be taken and of other 
facts within the specialized knowledge of the 
agency. The noticed fact and its source shall be 
stated and made known to affected parties at the 
earliest practicable time, and any party shall on 
timely request be afforded an opportunity to dis- 
pute the noticed fact through submission of evi- 
dence and argument. An agency may use its 
experience, technical competence, and specialized 
knowledge in the evaluation of evidence pre- 
sented to it. 

§ I50B-42. Final agency decision; official re- 
cord. 

(a) After compliance with the provisions of 
G.S. 150B-40(e), if applicable, and review of the 
official record, as defmed in subsection (b) of this 
section, an agency shall make a written fmal de- 
cision or order in a contested case. The decision 
or order shall include fmdings of fact and con- 
clusions of law. Findings of fact shall be based 
exclusively on the evidence and on matters offi- 
cially noticed. Findings of fact, if set forth in 
statutory language, shall be accompanied by a 
concise and explicit statement of the underlying 
facts supporting them. A decision or order shall 
not be made except upon consideration of the 
record as a whole or such portion thereof as may 
be cited by any party to the proceeding and shall 
be supported by substantial e\ idence admissible 
under G.S. I50B-41. A copy of the decision or 
order shall be sened upon each party personally 
or by certified mail addressed to the party at the 



SOI 



6:13 NORTH CAROLINA REGISTER September 30, I99I 



GENERAL STA TUTES OF NORTH CAROLINA 



latest address given by the party to the agency 
and a copy shall be furnished to his attorney of 
record. 

(b) An agency shall prepare an official record 
of a hearing that shall include: 

(1) Notices, pleadings, motions, and interme- 
diate rulings; 

(2) Questions and offers of proof, objections, 
and rulings thereon; 

(3) Evidence presented; 

(4) Matters officially noticed, except matters 
so obvious that a statement of them 
would serve no useful purpose; 

(5) Proposed fmdings and exceptions; and 

(6) Any decision, opinion, order, or report by 
the officer presiding at the hearing and by 
the agency. 

(c) Proceedings at which oral evidence is pre- 
sented shall be recorded, but need not be tran- 
scribed unless requested by a party. Each party 
shall bear the cost of the transcript or part thereof 
or copy of said transcript or part thereof which 
said party requests. 

Article 4. 
Judicial Review. 
§ 150B-43. Right to judicial review. 

Any person who is aggrieved by the fmal deci- 
sion in a contested case, and who has exhausted 
all administrative remedies made available to him 
by statute or agency rule, is entitled to judicial 
review of the decision under this /Vrticle, unless 
adequate procedure for judicial review is pro- 
vided by another statute, in which case the review 
shall be under such other statute. Nothing in this 
Chapter shall prevent any person from invoking 
any judicial remedy available to him under the 
law to test the vahdity of any administrative 
action not made reviewable under this Article. 
§ 150B-44. Right to judicialintervention when 
decision unreasonably delayed. 

Unreasonable delay on the part of any agency 
or administrative law judge in taking any required 
action shall be justification for any person whose 
rights, duties, or privileges are adversely affected 
by such delay to seek a court order compelling 
action by the agency or administrative law judge. 
An agency that is subject to .Article 3 of this 
Chapter and is not a board or commission has 
90 days from the day it receives the official record 
in a contested case from the Office of Adminis- 
trative Hearings to make a fmal decision in the 
case. This time limit may be extended by the 
parties or, for good cause shown, by the agency 
for an additional period of up to 90 days. An 
agency that is subject to Article 3 of this Chapter 
and is a board or commission has 90 days from 
the day it receives the official record in a con- 
tested case from the Office of Administrative 



Hearings or 90 days after its next regularly 
scheduled meeting, whichever is longer, to make 
a final decision in the case. This time limit may 
be extended by the parties or, for good cause 
shown, by the agency for an additional period of 
up to 90 days. If an agency subject to Article 3 
of this Chapter has not made a fmal decision 
within these time limits, the agency is considered 
to have adopted the administrative law judge's 
recommended decision as the agency's fmal deci- 
sion. Failure of an agency subject to Article 3A 
of this Chapter to make a fmal decision within 
180 days of the close of the contested case hear- 
ing is justification for a person whose rights, du- 
ties, or privileges are adversely affected by the 
delay to seek a court order compelling action by 
the agency or, if the case was heard by an ad- 
ministrative law judge, by the administrative law 
judge. 

§ 150B-45. Procetlure for seeking review; 

waiver. 

To obtain judicial review of a fmal decision un- 
der this Article, the party seeking review must fde 
a petition in the Superior Court of Wake County 
or in the superior court of the county where the 
person resides. 

The person seeking review must file the petition 
within 30 days after the person is served with a 
written copy of the decision. A person who fails 
to fde a petition within the required time waives 
the right to judicial review under this /Vrticle. 
For good cause shown, however, the superior 
court may accept an untimely petition. 
§ 150B-46. Contents of petition; copies ser\ed 
on all parties; intervention. 

The petition shall exphcitly state what ex- 
ceptions are taken to the decision or procedure 
and what relief the petitioner seeks. Within 10 
days after the petition is filed with the court, the 
party seeking the review shall serve copies of the 
petition by personal service or by certified mail 
upon all who were parties of record to the ad- 
ministrative proceedings. Names and addresses 
of such parties shall be furnished to the petitioner 
by the agency upon request. Any party to the 
administrative proceeding is a party to the review 
proceedings unless the party withdraws by noti- 
fying the court of the withdrawal and serving the 
other parties with notice of the withdrawal. 
Other parties to the proceeding may file a re- 
sponse to the petition within 30 days of service. 
Parties, including agencies, may state exceptions 
to the decision or procedure and what rehef is 
sought in the response. 

Any person aggrieved may petition to become 
a party by filing a motion to inter\'ene as pro- 
vided m G.S. lA-1, Rule 24. 



6:13 NORTH CAROLINA REGISTER September 30, I99I 



S02 



GESERAL STATUTES OE NORTH CAROLINA 



§ 150B-47. Records filed with clerk of superior 
court; contents of records; costs. 

Within 30 days after receipt of the copy of the 
petition for review, or within such additional 
time as the court may allow, the agency that 
made the fmal decision in the contested case shall 
transmit to the reviewing court the original or a 
certified copy of the official record m the con- 
tested case under review together with: (ij any 
exceptions, proposed fmdings of fact, or written 
arguments submitted to the agency in accordance 
with G.S. 150B-36(aj; and (ii) the agency's fmal 
decision or order. With the permission of the 
court, the record may be shortened by stipulation 
of all parties to the re\iew proceedings. Any 
party unreasonably refusing to stipulate to limit 
the record may be taxed by the court for such 
additional costs as may be occasioned by the re- 
fusal. The court may require or permit subse- 
quent corrections or additions to the record when 
deemed desirable. 
§ 150B-48. Stay of decision. 

At any time before or during the review pro- 
ceeding, the person aggrieved may apply to the 
reviewing court for an order staying the operation 
of the administrative decision pending the out- 
come of the review. The court may grant or 
deny the stay in its discretion upon such terms 
as it deems proper and subject to the provisions 
of G.S. lA-1, Rule 65. 
§ 150B-49. New evidence. 

.-Vn aggrieved person who files a petition in the 
superior court may apply to the court to present 
additional evidence. If the court is satisfied that 
the evidence is material to the issues, is not 
merely cumulative, and could not reasonably 
have been presented at the administrative hear- 
ing, the court may remand the case so that addi- 
tional evidence can be taken. If an administrative 
law judge did not make a recommended decision 
in the case, the court shall remand the case to the 
agency that conducted the admimstrative hearing. 
After hearing the evidence, the agency may affirm 
or modify its previous fmdings of fact and fmal 
decision. If an administrative law judge made a 
recommended decision in the case, the court shall 
remand the case to the administrative law judge. 
.\fter hearing the evidence, the administrative law 
judge may affirm or modify his pre\ious fmdings 
of fact and recommended decision. The admin- 
istrative law judge shall forward a copy of his 
decision to the agency that made the fmal deci- 
sion, which in turn may affum or modify its 
previous findings of fact and fmal decision. The 
additional evidence and any affirmation or mod- 
ification of a recommended decision or fmal de- 
cision shall be made part of the official record. 



§ 1508-50. Review by superior court without 

The review by a superior court of agency deci- 
sions under this Chapter shall be conducted by 
the court without a jury. 
§ 1508-51. Scope of review. 

(aj Imtial Determination in Certain Cases. In 
reviewing a fmal decision in a contested case in 
which an administrative law judge made a re- 
commended decision, the court shall make two 
initial determinations. First, the court shall de- 
termine whether the agency heard new evidence 
after receiving the recommended decision. If the 
court determines that the agency heard new evi- 
dence, the court shall reverse the decision or re- 
mand the case to the agency to enter a decision 
in accordance with the evidence in the official 
record. Second, if the agency did not adopt the 
recommended decision, the court shall determine 
whether the agency's decision states the specific 
reasons why the agency did not adopt the re- 
commended decision. If the court determines 
that the agency did not state specific reasons why 
it did not adopt a recommended decision, the 
court shall reverse the decision or remand the 
case to the agency to enter the specific reasons. 

(b) Standard of Review. After making the de- 
termmations, if any, required by subsection (a), 
the court re\iewing a final decision may affirm 
the decision of the agency or remand the case for 
further proceedings. It may also reverse or 
modify the agency's decision if the substantial 
rights of the petitioners may have been preju- 
diced because the agency's findings, inferences, 
conclusions, or decisions are: 

(1) In violation of constitutional provisions; 

(2) In excess of the statutory authority or ju- 
nsdiction of the agency: 

(3) Made upon unlawful procedure: 

(4) .'VtTected by other error of law; 

(5) Unsupported bv substantial evidence ad- 
missible under G.S. 150B-29(a), 1508-30, 
or 150B-31 in view of the entire record as 
submitted: or 

(6) .\rbitrar\" or capricious. 

§ 1508-52. .Appeal; stay of court's decision. 
A party to a review proceeding in a superior 
court may appeal to the appellate di\'ision from 
the final judgment of the superior court as pro- 
vided in G.S. 7A-27. Pendmg the outcome of 
an appeal, an appealing party may apply to the 
court that issued the judgment under appeal for 
a stay of that judgment or a stay of the adminis- 
trative decision that is the subject of the appeal, 
as appropriate. 

rVrticle 5. 

Publication of Administrative Rules. 

Repealed. 



803 



6:B NORTH CAROLINA REGISTER September 30, 1991 



EXECUTIVE ORDERS 



EXECUTIVE ORDER NUMBER 149 
RESCISSION OF EXECUTIVE ORDER 
NUMBER 79 WHICH ESTABLISHED 

THE NORTH CAROLINA SMALL 
BUSINESS COUNCIL 

By the authority vested in me as Governor by 
the Constitution and laws of North Carolina, IT 
IS ORDERED: 

Executive Order Number 79 establishing the 
North Carolina Small Business Council is hereby 
rescinded. 

Done this the 15th day of August, 1991. 

EXECUTIVE ORDER NUMBER 150 
NORTH CAROLINA HUM.\N SERVICE TRANS- 
PORTATION COUNCIL 

WHEREAS, the North Carolina Departments 
of Transportation, Human Resources, and Eco- 
nomic and Community Development administer 
State and Eederal funding programs which may 
be used by local human service agencies to pro- 
vide necessary client transportation services; and 

WHEREAS, the administrative pohcies and 
procedures of these departments greatly affect 
vehicle usage and the provision of transportation 
services at the local level; and 

WHEREAS, the Interagency Transportation 
Review Committee was established in 1978 to 
review the transportation components of all ap- 
plications or plans requesting transportation 
funding when the funds are administered by a 
State department or agency; and 

WHEREAS, the Interagency Transportation 
Review Committee process has led to a much 
more coordinated and cost effective use of trans- 
portation resources, both capital and operating, 
by local human service transportation providers; 
and 

WHEREAS, the General Assembly has appro- 
priated funds for the Elderly and Handicapped 
Transportation Assistance Program based on the 
assurance of cost-effectiveness provided by im- 
plementation of the local Transportation Devel- 
opment Plan; and 

WHEREAS, Title XIX Medicaid transporta- 
tion funds are to be expended in a manner con- 
sistent with the local Transportation 
Development Plan; and 



WHEREAS, there is a need for a statement of 
policy on coordination of transportation re- 
sources and these State departments and agencies 
are in a position to facilitate the more efficient 
use of these resources. 

THEREFORE, pursuant to the authority 
vested in me as Governor by the Constitution 
and laws of this State IT IS ORDERED: 

Section 1. POLICY 

That, wherever practical, existing transportation 
resources, public and private, should be utUized 
before any new resources wiU be made available 
through public funds; 

That the locally prepared and adopted Trans- 
portation Development Plan shall continue to 
be the means by which to determine the most 
cost effective and efficient use of transportation 
resources; and 

That the Department of Transportation shall 
provide, to the extent that funds are available and 
equipment is used consistent with the local 
Transportation Development Plan, capital 
equipment for the provision of local human ser- 
vice transportation while the transportation funds 
from other departments are used primarily for 
operating assistance. 

Section 2. ESTABLISHMENT 

(1) There is hereby created the North Carolina 
Human Service Transportation Council. 
The Council wiU be composed of represen- 
tatives from the North Carolina Depart- 
ments of Transportation, Human 
Resources, and Economic and Community 
Development. The Secretaries of the re- 
spective departments shall determine those 
divisions to be represented on the Council. 
Representation should include all divisions 
which administer federal and state funds 
used to provide human service transporta- 
tion at the local level. Division directors 
will be responsible for selecting a staff per- 
son as the division's council representative. 
Council appointees should be in policy 
making positions and have authority over 
subrecipient budget review and approval. 

(2) Departments, agencies or programs which 
are outside the jurisdiction of the Executive 
Order are encouraged to join the Council 
and agree to adopt the policies, procedures 
and decisions of the Council. 

(3) The State departments shall cooperate in 
the formation, follow the policies, proce- 
dures and decisions of, and support the Hu- 
man Service Transportation Council as 
described herein. Council representatives 



6: 13 NOR TH CA ROLINA REGIS TER September 30, 1 991 



S04 



EXECUTIVE ORDERS 



shall assist the Department of Transporta- 
tion in encouraging local agencies to partic- 
ipate in transportation development 
planning efforts and in subsequent plan im- 
plementation, and to operate vehicles in a 
manner consistent with the local plan. 
(4) The Director of the Public Transportation 
and Rail Division shall chair the Council. 

Section 1 DUTIES OF COUNCIL 

The Council shall have the following duties: 

(1) to implement poUcy and apply criteria as 
developed by the Council; 

(2) to provide written notice of recommen- 
dations based upon review of applications 
or plans to the appropriate State agency; 

(3) to review the transportation components 
of all applications or plaits requesting trans- 
portation funding when funds are adminis- 
tered by a member agency; 

(4) to provide approval for the purchase of all 
human ser\'ice transportation vehicles fi- 
nanced by State administered programs; and 

(5) to advise and make recommendations to the 
Department of Transportation concerning 
human service transportation policy. 

Section 4, ADMINISTRATION 

The Department of Transportation - Public 
Transportation & Rail Di\ision shall provide the 
administrative support for the Council. 

Section 5, TRANSPORTATION FUNDING 
DECISIONS 

In case of disputes, the local and/or State agency 
shall ha\-e the opportunity to address the Coun- 
cil. When the Council decision is appealed or 



when the Council caimot reach consensus, the 
Secretary of the Department of Transportation, 
after conferring with the appropriate Department 
Secretary, shall have authority on all transporta- 
tion funding decisions under the jurisdiction of 
the Council. 

Section 6, AGENCY RESPONSIBILITIES 

(1) To further the objectives of the Executive 
Order, ajj departments and agencies under 
the Executive Order shall immediately draft 
directives and procedures necessary to im- 
plement these policies. Such drafts shall be 
submitted to the Secretary of Transportation 
for review and approval within 60 days of 
the signing of this Executive Order. PubUc 
Transportation & Rail Division staff assist- 
ance shall be made available as necessary. 

(2) There shall he a signed statement of policy 
for each agency under the jurisdiction of this 
Executive Order. The statement should be 
signed by the respective Department Secre- 
tary and each of the division directors within 
the department that come under the juris- 
diction of this Executive Order. The state- 
ment wiU address the agency's commitment 
to the objectives of this Executive Order and 
the policies and procedures of the Council. 

Section r EFFECTIVE DATE 
This order shall be effective immediately and 
shall remain in effect until July 1, 1993. 

Done in the Capital City of Raleigh, North 
Carolina this the 21st day of August, 1991. 



805 



6:13 NORTH CAROLINA REGISTER September 30, 1991 



VOTING RIGHTS ACT FINAL DECISION LETTER 



[G.S. 120-30.9H, effective July 16, 1986, requires that all letters and other documents issued by the 
Attorney General of the United States in which a final decision is made concerning a "change af- 
fecting voting" under Section 5 of the Voting Rights Act of 1965 be published in the North Carolina 
Register. J 



U.S. Department of Justice 
Civil Rights Division 

JRD:MAP:SAL:lrj 

DJ 166-012-3 Voting Section 

91-2474 P.O. Box 66128 

Washington, D.C. 20035-6128 

September 12, 1991 

Michael CroweU, Esq. 
Thanington, Smith & Hargrove 
P. O. Box 1151 
Raleigh, North Carolina 27602 

Dear Mr. CroweU: 

This refers to the adoption of a limited voting system with seven commissioners elected to four 
year, staggered terms, with a plurality- win requirement in the primary, and the implementation schedule 
for the board of commissioners in Beaufort County, North Carolina, submitted to the Attorney Gen- 
eral pursuant to Section 5 of the Voting Rights Act of 1965, as amended, 42 U.S.C. 1973c. We received 
your submission on July 15, 1991. 

The Attorney General does not interpose any objection to the specified changes. However, we 
note that Section 5 expressly provides that the failure of the Attorney General to object does not bar 
subsequent litigation to enjoin the enforcement of the changes. See the Procedures for the Adminis- 
tration of Section 5 (28 C.F.R. 51.41). 

Sincerely, 



John R. Durme 

Assistant Attorney General 

Civil Rights Division 



By: 



Gerald W. Jones 
Chief, Voting Section 



6.13 NORTH CAROLINA REGISTER September 30. I99I 806 



PROPOSED RULES 



TITLE 10 - DEPARTMENT OF HL^SIAN 
RESOURCES 



A^. 



otice is hereby given in accordance with G.S. 
I SOB- 12 that the Department of Human 
Resources Division of Medical Assistance intends 
to amend rule(s) cited as 10 SCAC 26D .0016; 
26H .0107, ,0508: and adopt rule(s) cited as 10 
NCAC 26H .0209. 

J he proposed effective date of this action is 
February 1, 1992. 

1 he public hearing will be conducted at 1:30 
p.m. on October 31, 1991 at the Sorth Carolina 
Division of Medical Assistance, 1985 Lmstead 
Drive, Room 201. Raleigh, .V.C. 27603. 



c 



-omment Procedures: Written comments con- 
cerning these rules must be submitted by October 
31, 1991 , to: Division of .Medical .Assistance, 
1985 Umstead Drive, Raleigh, .\.C. 27603, 
ATTN.: Bill Hottel, APA Coordinator. Oral 
comments may be presented at the hearing. In 
addition, a fiscal impact statement is available 
upon written request from the same address. 

Editor's Sote: 10 SCAC 26H .0107, .0209 and 
.0508 have been filed as temporary rules effective 
August 1, 1991 for a period of 180 days to expire 
on January 31, 1992. 

10 SCAC 26D .0016 has been filed as a tempo- 
rary rule effective August 15, 1991 for a period of 
180 days to expire on February 15, 1992. 

CHAPTER 26 - MEDICAL ASSISTANCE 

SUBCHAPTER 26D - LIMITATIONS ON 
AMOUNT: DLRATION: AND SCOPE 

.0016 CO-PAVMENT 

(a) Co-payment Requirements. The following 
requirements are imposed on all Medicaid recip- 
ients for the following ser\-ices: 

(1) Outpatient Hospital Services. Co- 
payment will be charged at the rate of one 
dollar ($1.00) per outpatient visit. 

(2) Chiropractic Services. Co-payment will 
be charged at the rate of fifty cents ($.50) 
per chiropractic visit. 

(3) Pediatric Services. Co-payment wlU be 
charged at the rate of one dollar ($1.00) 
per podiatric visit. 

(4) Optometric Services. Co-payment will 
be charged at the rate of one doUar ($1.00) 
per optometric visit. 



(5) Optical Supplies and Ser\'ices. Co- 
payment will be charged at the rate of two 
dollars ($2.00) per item. Co-payment for 
repair of eyeglasses and other optical sup- 
plies will be charged at the rate of two 
dollars ($2.00) per repair exceeding five 
doUars ($5.00). 

(6) Prescribed Drugs. Co paym^ant Vr^ii fee 
chargod at tfee Fate &f Effective August 15, 
1991, the recipient co-pavment amount 
for prescription drugs will increase from 
fifty cents ($.50) per prescription to one 
doUar (SI. 00) per prescription including 
refdls. 

(7) Dental Services. Co-payment wiU be 
charged at the rate of two dollars ($2.00) 
per visit, except when more than one visit 
is required. If more than one visit is re- 
quired but the service is billed under one 
procedure code with one date of service, 
then only one co-payment shall be col- 
lected. FuU and partial dentures are ex- 
amples. 

(8) Physicians. Co payment wiH- fee chargod 
at- tfee Fate »f Effective .August 15. 1991. 
the recipient co-pavment amount for a 
phvsician visit will increase from frfty 
cents ($.50) per visit to two dollars ($2.00) 
per visit. 

(9) Hospital Inpatient Services. No co- 
payment win be charged for hospital in- 
patient services. 

(10) Rural Health Clinics. No co-payment 
win be charged for rural health clinic ser- 
vices. 

(11) Clinics (Other than Rural Health). Co- 
payment will be charged at the rate of fifty 
cents ($.50) per visit. 

(12) Non- Hospital Dialysis Pacihty Services. 
No co-payment wiU be charged for non- 
hospital dialysis facility services. 

(13) Home Health Services. No co-payment 
will be charged for home health services. 

(14) Hearing .Aid Dispensers. No co-payment 
win be charged for services rendered by 
hearing aid dispensers. 

(15) Artibulance. No co-payment wiU be 
charged for ambulance services. 

(b) Co-payment Exemptions. No co-payment 
will be charged for the following services: 

(1) E PS DT related services; 

(2) Family Planning Services; 

(3) Services in state owned mental hospitals; 

(4) Services covered by both Medicare and 
.Medicaid; 

(5) Services to children under age 18; 

(6) Services related to pregnancy; 



807 



6:13 NORTH CAROLINA REGISTER September 30, 1991 



PROPOSED RULES 



(7) Sen'ices provided to residents of ICF, 
ICF-MR, SNF, Mental Hospitals; and 

(8) Hospital emergency room services. 

Authority G.S. IOSA-25(b); S.L. 1985, c. 479, s. 
86; 42 C.F.R. 440.230(d); Tax Equity and Fiscal 
Responsibility Act of 1982, Subtitle B; Section 95 
of Chapter 689, 1991 Session Laws. 

SUBCHAPTER 2611 - RKIMBLRSEMENT PLANS 

SECTION .0100 - REIMBURSEMENT FOR 
NURSING FACILITY SERVICES 

.0107 PAYMENT ASSURANCE 

(a) The state will pay each provider of nursing 
care services, who furnishes the services in ac- 
cordance with the requirements of the State Plan 
and the participation agreement, the amount de- 
termined under the plan. In addition. Skilled 
Nursing Facilities must be enrolled in the Title 
XVI 11 Program. 

(b) In no case shall the payment rate for ser- 
vices provided under the plan exceed the facihty's 
customary charges to the general public for such 
services. 

(c) The payment methods and standards set 
forth herein are designed to enlist the partic- 
ipation of any provider who operates a facility 
both economically and efficiently. Participation 
in the program shall be Limited to providers of 
service who accept, as payment in full, the 
amounts paid in accordance with the State Plan. 
This reimbursement plan is effective consistent 
with and on approval of the State Plan for Med- 
ical Assistance. 

(d) In all circumstances involving third party 
payment, Medicaid is the payor of last resort. 
No payment will be made for a Medicaid recipi- 
ent who is also ehgible for Medicare, Part A, for 
the first 20 days of care rendered to skilled nurs- 
ing patients. Medicaid payments for co- 
insurance for such patients will be made for the 
subsequent 21st through the 100th day of care. 
The Division of Medical Assistance will pay an 
amount for Medicare Part A deductibles and co- 
insurance, the total of which will equal the facil- 
ity's Medicaid per diem rate less any Medicare 
Part A payment, effective August 1, 1991. In the 
case of ancillary services providers are obligated 
to: 

(1) maintain detailed records or charges for 
all patients; 

(2) bill the appropriate Medicare Part B car- 
rier for aJl services provided to Medicaid 
patients that may be covered under that 
program; and 

(3) allocate an appropriate amount of ancil- 
lary costs, based on these charge records 



adjusted to reflect Medicare denials of 
coverage, to Medicare Part B in the an- 
nual cost report, 
(e) The state may withhold payments to pro- 
viders under the following circumstances; 

(1) If the state has a reasonable expection that 
the provider wiU not expend its direct rate 
for reasonable and allowable direct patient 
care costs, the state may, at its discretion, 
withhold a portion of each payment so as 
to avoid a large amount due back to the 
state upon reimbursement settlement 
pursuant to the provision of Paragraph 
.0104(e) of this Section. 

(2) Upon provider termination the state may 
withhold a sum of money from provider 
payments that it reasonably expects will 
be due when fmal reimbursement settle- 
ments for all previous periods, including 
the period in which the termination oc- 
curred, are completed. 

(3) Upon determination of any sum due the 
Medicaid Program or upon instruction 
from a legally authori^;ed agent of the 
State or Federal Government the state 
may withhold sums to meet the obli- 
gations identified. 

(4) The state may arrange repayment sched- 
ules within the limits set forth in federal 
regulations in lieu of withholding funds. 

(5) The state m.ay charge reasonable interest 
or overpayments from the date that the 
overpayment occurred. 

Authority G.S. I08A-25(b); I08A-54; I08A-55; 
S.L. 1985, c. 479. s. 86; Section 95 of Chapter 
689, 1991 Session Law.':; 42 C.F.R. 447, Subpart 
C. 

SECTION .0200 - HOSPITAL INPATIENT 
REIMBURSEMENT PLAN 

.0209 PAYMENT OF MEDICARE PART A 
DEDUCTIBLES 

In regard to payment of Medicare Part A 
deductibles, the Division of Medical Assistance 
wilJ pay the Medicaid median per diem inpatient 
rate for one day in lieu of the Medicare Part A 
inpatient deductible, effective August 1, 1991. 
The median rate will be determined as of July 1 
each year. 

Authority G.S. l08A-25(b); 108A-54; lOSA-55; 
Section '95 of Chapter 689. 1991 Session Laws; 
42 C.F.R. 447, Subpart C. 

SECTION .0500 - REIMBURSEMENT FOR 
SERVICES 



6:13 NORTH CAROLINA REGISTER September iO, 1991 



808 



PROPOSED RULES 



.0508 ni RABLE MKDICAL EQLII'MENT AND 
REEA lED SLPI'EIES 

(a) l"tTecti\c August _L 1991, payment for each 
claim tor durable medical equipment and associ- 
ated supplies will be equal to the lower of the 
supplier's usual and customary billed charges or 
the maximum fee established for each item of 
durable medical equipment or related supply. 
The maximum fees are set at +tW percent e4 Ae 
Medicare -Part 8- foes as &f Januur>' 4- trf each y e ar. 
the Medicaid fee schedule in effect on July j_^ 
l'J91. 1 ees tor added equipment \siU be set at 
.Medicare I'art B fees. If a Medicare fee camiot 
be obtained, fof a particular equipment item, the 
fee will be based on estimates of reasonable costs. 
aft4 updated eaek January 4- hf the forecast e d 
percentage increa^^ ift medical iiupplioo aH4 
equipment pricofi. The maximum allowable fee 
will be updated each August _L beginning August 
L^ 1 '-W 1 . based on the (iross National Product 
(CjNI') Implicit Price Deflator, but not to exceed 
the percentage increase approved by the North 
(rarolina State Legislature. There will be no ret- 
roactive payment adjustments for fee changes. 

(b) Each equipment item wiU be assigned to 
one of the following categories of payment 
methods: 

(1) Purchase fee paid for inexpensive, rou- 
tinely purchased, and customized equip- 
ment. 

(2) .Monthly rental paid up to purchase price 
but for no more than 15 continuous 
months. 

(3) Monthly rental payment for oxygen and 
oxygen equipment without any Limita- 
tions. 

(4) Servicing and repair fees will be established 
for appropriate items. 

Authoriiy G.S. l08A-25(b): 42 C.F.R. 447, Sub- 
part D; Section 95 of Chapter 6S9, 1991 Session 
Laws. 



Jyot/ce is hereby given in accordance with G.S. 
I SOB- 1 2 that the Department of Human 
Resources! Division of Medical Assistance intends 
to repeal ru!e(s) cited as 10 yCAC 26 H .0402. 

1 he proposed effective date of this action is 
February /, 1992. 

1 he public hearing will be conducted at 1 :30 
p.m. on November 14. 1991 at the North Carolina 
Division of Medical Assistance, 1985 Umstead 
Dri\>e. Room 201. Raleigh. .V.C. 27603. 



Co 



omment Procedures: Written comments con- 
cerning this repeal must be submitted by Novem- 
ber 14, 1991, to: Division of Medical Assistance, 
1985 Umstead Drive, Raleigh, N.C. 27603, 
ATTN.: Bill Uottel. A PA Coordinator. Oral 
comments may be presented at the hearing. In 
addition, a fiscal impact statement is available 
upon written request from the same address. 

CHAPTER 26 - MEDICAL ASSISTANCE 

SLBCHAPTER 26H - REIMBLRSEMENT PLANS 

SECTION .0400 - PROVIDER FEE SCHEDULES 

.0402 DENTIST FEE SCHEDULE (REPEALED) 

Statutory Authority G.S. I08A-25(b); S.L. 1985, 
c. 479. s. 86. 

Xn LE 14A - DEPARTMENT OF CRIME 
CONTROL AND PUBLIC SAFETY 

lyotice is hereby given in accordance with G.S. 
I50B-I2 that the Department of Crime Control 
and Public Safety', Division of State Highway Pa- 
trol intends to adopt rule(s) cited as I4A NCAC 
9H .0304. 

1 he proposed effective date of this action is 
February f 1992. 

1 he public hearing will be conducted at 10:00 
a.m. on October 31. 1991 at the Library, Second 
Floor. .Archdale Building. 512 N. Salisbury Street, 
Raleigh. NC 276/1. 



Co 



■ omment Procedures: Any interested person 
may present comments relevant to the action pro- 
posed at the public hearing either in writing or oral 
form. Written statements not presented at the 
public hearing may be directed prior to the hearing 
to Wanda D. Goodson, Administrative Procedures 
Coordinator, First Floor. Archdale Building, 512 
N. Salisbury Street. P. O. Box 27687, Raleigh, 
NC 27611-7687. 

CHAPTER 9 - STATE HIGHWAY PATROL 

SUBCHAPTER 9H - ENFORCEMENT 
REGULATIONS 

SECTION .0300 - WRECKER SERYICE 

.0304 NOTIFYING REGISTERED OWN,ER 

A member who authorizes the towing and/or 
storage of a vehicle in the absence of the owner 



809 



6:13 NORTH CAROLINA REGISTER September 30, 1 99 1 



PROPOSED RULES 



shall, as soon as practicable, attempt to notify the 
owner of such towing and/or storage. The 
member shall attempt to contact the owner by 
telephone or request a telecommunicator to at- 
tempt to contact the owner by telephone and 
provide the owner with the location of the vehi- 
cle. At least three attempts must be made for 
vehicles registered in North Carolina and one at- 
tempt for vehicles registered out of state. A 
member must record the person contacted or the 
attempts made. 

Statutory Authority G.S. 20-219.11. 

TITLE 15A - DEPARTMENT OF 

ENA IRONMENT, HEALTH, AND 

NATURAL RESOURCES 



Jyotice is hereby given in accordance with G.S. 
I SOB- 1 2 that the EHNR - Division of Land Re- 
sources intends to amend rule(s) cited as ISA 
NCAC 4A .OOOS; 4B .0006, .0009, .00/6, .00/8, 
.002S; and 4C .0007. 

1 he proposed effective date of this action is 
February /, /992. 

J he public hearing will be conducted at /O.OO 
a.m. on November S, /99I at the /-/earing Room 
- Archdale Building, S/2 N. Salisbury Street, 
Raleigh, N.C. 

y^omment Procedures: All persons interested in 
this matter are invited to attend. Comments, 
statements, data and other information may be 
submitted in writing prior to, during, or within six 
(6) days after the hearing or may be presented 
orally at the hearing. Oral statements may be 
limited at the discretion of the hearing officer. 
Submittal of written copies of oral statements is 
encouraged. For more information, contact Mell 
Nevils, Division of Land Resources, P.O. Box 
276S7, Raleigh, N.C. 276/1 (9/9) 733-4574. 

CHAPTER 4 - SEDIMENTATION CONTROL 

SLBCHAPTER 4A - SEDIMENTATION 
CONTROL COM.MISSION ORGANIZATION 

.0005 DEFINITIONS 

As used in this Chapter, the foUowing terms 
shall have these meanings: 

(1) "Accelerated Erosion" means any increase 
over the rate of natural erosion, as a result 
of land-disturbing activities. 

(2) "Adequate Erosion Control Measure, 
Structure, or Device" means one which 



controls the soil material within the land 
area under responsible control of the person 
conducting the land-disturbing activity. 

(3) "Borrow" means fill material which is re- 
quired for on-site construction and is ob- 
tained from other locations. 

(4) "Buffer Zone" means the strip of land ad- 
jacent to a lake or natural watercourse, the 
' ■ ■ ■ idth ©f ' I ' . 'hioh \% moaourod from the odgo 
ef the water te- the noaroot e dg e ef the 4*s- 
turbod area, with the 2^ porcont &f the step 

natural »f artificial moans »f confuiLng visi- 
ble oiltation. 

(5) "Ground Cover" means any natural 
vegetative growth or other material which 
renders the soil surface stable against accel- 
erated erosion. 

(6) "Lake or Natural Watercourse" means any 
stream, river, brook, swamp, sound, bay, 
creek, run, branch, canal, waterway, estuary, 
and any reservoir, lake or pond, natural or 
impounded in which sediment may be 
moved or carried in suspension, and which 
could be damaged by accumulation of 
sediment. 

(7) "Natural Erosion" means the wearing 
away of the earth's surface by water, wind, 
or other natural agents under natural envi- 
ronmental conditions undisturbed by man. 

(8) "Person Responsible for the Violation", 
as used in G.S. 1 13A-64, means: 

(a) the developer or other person who has or 
holds himself out as having fmancial or 
operational control over the land- 
disturbing activity; and/ or 

(b) the landowner or person in possession or 
control of the land when he has directly 
or indirectly allowed the land-disturbing 
activity or has benefitted from it or he has 
failed to comply with any provision of the 
Act, these Rules, or any order or local 
ordinance adopted pursuant to this Act 
as imposes a duty upon him. 

(9) "Person Conducting Land Disturbing Ac- 
tivity" means any person who may be held 
responsible for a violation unless expressly 
provided otherwise by the Act, these Rules, 
or any order or local ordinance adopted 
pursuant to the Act. 

(10) "Phase of Grading" means one of two 
types of grading, rough or fme. 

(11) "Plan" means an erosion control plan. 

(12) "Sedimentation" means the process by 
which sediment resulting from accelerated 
erosion has been or is being transported off 
the site of the land-disturbing activity or into 
a lake or natural watercourse. 



6:15 NORTH CAROLINA REGISTER September 50, 1991 



SIO 



PROPOSED RULES 



(13) "Storm Water Runoff means the direct 
runoff of water resulting from precipitation 
in any form. 

(14) ''Tract" moans aii contiguoufi land aftd- 
hodi e ^i ef water ift eft<* ownorohip, ef con 
tiijuou ' - i laft4 a«4 bodioo e4^ water » di'rorno 
O' t ' i nor '. hip boing do'elopod a* a unit, al- 
though ft»(- nocofinarily aH at- »*» tim e . 
"Being Conducted" means a land-disturbing 
acti\ity has been mitiated and permanent 
stabilb.ation of the site has not been com- 
pleted. 

(15) "Uncovered" means the removal of 
ground co\'er from, on, or above the soil 
surface. 

(16) "Undertaken" means the initiating of any 
activity, or phase of activity, which results 
or will result in a change in the ground co\'er 
or topography of a tract of land. 

(17) "Waste" means surplus materials resulting 
from on-site construction and disposed of 
at other locations. 

(18) "Energj' Dissipator" means a structure or 
a shaped channel section with mechanical 
armoring placed at the outlet of pipes or 
conduits to receive and break down the en- 
erg>" from high velocity flow. 

(19) "Storm Drainage Facilities" means the 
system of inlets, conduits, channels, ditches 
and appurtenances which ser.'e to collect 
and convey stonnwater through and from a 
given drainage area. . 

(20) "Ten Year Storm" means the surface 
runoff resulting from a rainfall of an inten- 
sity expected to be equalled or exceeded, on 
the average, once in 10 years, and of a du- 
ration which will produce the maximum 
peak rate of runoff, for the watershed of in- 
terest under average antecedent wetness 
conditions. 

(21) "Velocity" means the average velocity of 
flow through the cross section of the main 
channel at the peak flow of the storm of in- 
terest. The cross section of the main chan- 
nel shall be that area defmed by the 
geometry of the channel plus the area of 
flow below the flood height defmed by ver- 
tical lines at the main channel banks. 
Overload flows are not to be included for the 
purpose of computing velocity of flow. 

(22) "Discharge Point" means that point at 
which runofl" leaves a tract of land. 

(23) "Completion of Construction or Devel- 
opment" means that no further land- 
disturbiag activity is required on a phase of 
a project except that which is necessary for 
estabhshing a permanent ground cover. 



(24) "High Quality Waters" means those clas- 
sified as such m 15A NCAC 2B .0101(e)(5) 
- General Procedures, which is incorporated 
herein by reference to include further 
amendments pursuant to G.S. 150B- 14(c). 

(25) "High QuaUty Water (HQW) Zones" 
means areas in the Coastal Counties that are 
within 575 feet of High Quadity Waters and 
for the remainder of the state areas that are 
within one mile of and drain to HQW's. 

(26) "Director" means the Director of the Di- 
vision of Uand Resources of the Department 
of Enviromnent, Health, and Natural Re- 
sources. 

(27) "Coastal counties" means the following 
counties: Beaufort, Bertie, Brunswick, 
Camden, Carteret, Chowan, Cras'en, 
Currituck. Dare, Gates, Hertford, Hyde, 
New Hanover, Onslow, Pamlico, 
Pasquotank, Pender, Perquimans, Tyrrell 
and Washington. 

(28) "Twentv-flve Year Storm" means the 
surface runoff resulting from a rainfall of an 
intensity expected to be equalled or ex- 
ceeded, on the a\'crage. once in 25 years, and 
of a duration which will produce the maxi- 
mum peak rate of runotY, from the 
watershed of interest under average 
antecedent wetness conditions. 



Statutory Authority G.S. / 13.4-52; 1 13A-54. 

SUBCHAPTER 4B - EROSION AND SEDIMENT 
CONTROL 

.0006 BASIC CONTROL OBJECTIVES 

An erosion and sedimentation control plan may 
be disapproved pursuant to 15A NCAC 4B .0018 
if the plan fails to address the foUowing control 
objectives: 

(1) Identify Critical /Vreas. Identify site areas 
subject to severe erosion, and off-site areas 
especially \'ulnerable to damage from ero- 
sion and sedimentation. 

(2) Limit Exposed Areas. Limit the size of the 
area exposed at any one time. 

(3) Limit Time of Exposure. Limit exposure 
to the shortest feasible time. 

(4) Control Surface Water. Control surface 
water run-off originating upgrade of exposed 
areas in order to reduce erosion and 
sediment loss during exposure. 

(5) Control Sedimentation. .All land-disturbing 
activity is to be planned and conducted so 
as to prevent off-site sedimentation damage. 

(6) Manage Storm Water Runoff. Whien the 
increased velocity of storm water runoff re- 

. suiting from a land-disturbing activity causes 



811 



6:13 NORTH CAROLINA REGISTER September iO, 1991 



PROPOSED RULES 



accelerated erosion of the receiving 
watercourse, plans shall include measures to 
control the velocity at to the point of dis- 
charge. 



Statutory Authority 
I ISA- 54.1. 



G.S. ll3A-54(d)(4); 



.0009 STORM WATER OUTLET PROTECTION 

(a) Persons shall conduct land disturbing ac- 
tivity so that the post construction velocity of the 
ten year storm run off in the receiving 
watercourse to the discharge point does not ex- 
ceed the greater of: 

(1) the velocity established by the table in 
Paragraph (d) of this Rule; or 

(2) the velocity of the ten year storm run off 
in the receiving watercourse prior to de- 
velopment. 

If conditions (1) or (2) of this Paragraph cannot 
be met, then the receiving watercourse to and 
including the discharge point shall be designed 
and constructed to withstand the expected veloc- 
ity anywhere the velocity exceeds the "prior to 
development" velocity by ten percent. 



(b) Acceptable Management Measures. The 
commission recognizes that management of 
storm water run off to control downstream ero- 
sion constitutes a developing technology and 
consequently invites the use of innovative tech- 
niques shown to produce successful results. Al- 
ternatives include: 

(1) Compensate for increased run off from 
areas rendered impervious by designing 
measures to promote infiltration. 

(2) Avoid increases in storm water discharge 
velocities by using vegetated or roughened 
swales and waterways in place of closed 
drains and paved sections. 

(3) Provide energy dissipators at storm drain- 
age outlets to reduce flow velocities at- to 
the discharge points. 

(4) Protect watercourses subject to accelerated 
erosion by improving cross sections 
and/or providing erosion-resistant Uning. 

(c) Exceptions. This Rule shall not apply 
when storm water discharge velocities wiU not 
create an erosion problem in the receiving 
watercourse. 



(d) The following table sets maximum permissible velocity for storm water discharges: 
Material 



Maximum Permissible 
Velocities For 



Fine Sand (noncoUoidal) 

Sandy Lx)am (noncoUoidal) 

Silt Loam (noncoUoidal) 

Ordinary Firm Loam 

Fine Grravel 

Stiff Clay (very coUoidal) 

Graded, Loam to Cobbles (noncoUoidal) 

Graded, SUt to Cobbles (coUoidal) 

Alluvial SUts (noncoUoidal) 

AUuvial Silts (coUoidal) 

Coarse Gravel (noncoUoidal) 

Cobbles and Shingles 

Shales and Hard Pans 



F.P.S. 

2.5 
2.5 
3.0 
3.5 
5.0 
5.0 
5.0 
5.5 
3.5 
5.0 
6.0 
5.5 
6.0 



M.P.S. 



Source: Adapted from recommendations by Special Committee on Irrigation Research, American 
Society of Civil Engineers, 1926, for channels with straight alignment. For sinuous charmels multiply 
allowable velocity by 0.95 for sUghtly sinuous, by 0.9 for moderately sinuous charmels, and by 0.8 for 
highly sinuous channels. 



Statutory Authority G.S. I l3A-54(b)(c). 

.0016 EXISTING UNCOVERED AREAS 

(a) .AU uncovered areas which: 

(1) existed on the effective date of these rules; 

(2) resulted from land disturbing activity; 

(3) exceed one contiguous acre; 



(4) are experiencing continued accelerated 
erosion; and 

(5) causing off- site damage from 
sedimentation, shaU be provided with 
ground cover or other protective meas- 
ures, structures, or devices sufficient to 



6:B NORTH CAROLINA REGISTER September 50, 1991 



812 



PROPOSED RULES 



restrain accelerated erosion and control 

off-site sedimentation, 
(bj The commission or local government shall 
ser^-e a notice to comply upon the landowner or 
other person in possession or control of the land 
by registered or certified mail or other means 
reasonably calculated to gi\e actual notice such 
as ser\'ice by the sheriff's department or hand 
dehver}'. The notice shall state the measures 
needed and the time allowed for compliance. 
The commission or local government issuing the 
notice shall consider the economic feasibility, 
technological expertise and quantity of work re- 
quired, and shall establish reasonable time limits 
for compliance. 

(c) State agency erosion and sedimentation 
control programs submitted to the commission 
for delegation of authority to administer such 
programs shall contain pro\'isions for the treat- 
ment of existing exposed areas. Such provisions 
shall consider the economic feasibility, existing 
technology, and quantity of work required. 

(d) This Rule shall not require ground cover 
on cleared land forming the future basin of a 
planned reservoir. 

Statutory Authority G.S. 1 13A-54. 

.0018 .APPRON .\L OF PL.ANS 

(a) Persons conductmg land-disturbing activity 
on a tract which covers one or more contiguous 
acres shall file three copies of the erosion and 
sedimentation control plan with the local gov- 
ernment ha\mg jurisdiction or with the Com- 
mission if no local government has jurisdiction, 
at least 30-days prior to beginning such activity 
and shall keep another copy of the plan on file 
at the job site. .After approving a plan, if the 
Commission or local government determines, ei- 
ther upon review of such plan or on inspection 
of the job site, that a significant risk of acceler- 
ated erosion or off-site sedimentation exists, the 
Commission or local go\'emment shall require a 
re\ised plan. Pending the preparation of the re- 
vised plan, work shall cease or shall continue 
under conditions outlined by the appropriate au- 
thority. 

(b) Commission Appro\'al 

( 1 ) TTie Commission shall review plans for all 
land-disturbing activity over which the 
Commission has exclusive jurisdiction by 
statute and all other land-disturbing ac- 
tivity if no local government has jurisdic- 
tion. 

(2j The Commission shall complete its review 
of any completed plan within 30 days of 
receipt and shall notify the person sub- 



mitting the plan in writing that it has 
been: 

(A) approved, 

(B) approved with modification, 

(C) approved with performance resen-a- 
tions, or 

(D) disapproved. 

(3) The Commission's disapproval, modifica- 
tion, or performance reservations of any 
proposed plan, shall entitle the person 
submitting the plan to an administrative 
hearing in accordance with the pro\'isions 
of G. S. 150B-23. (This section does not 
modify any other rights to a contested 
case hearina which mav arise under G.S. 
150B-23). 

(4) Subparagraph (b)(3) of this Rule shall not 
apply to the appro\'al or modification of 
plans reviewed bv the Commission pur- 
suant to G.S. 113A-61(c). 

(5) Any plan submitted for a land disturbing 
activity for which an environmental doc- 
ument is required by the North Carolina 
Environmental Policy Act shall be 
deemed incomplete until a complete envi- 
ronmental document is a\ailable for re- 
view. The Commission shall promptly 
notify the person submitting the plan that 
the 30 day time Limit for review of the 
plan pursuant to Subparagraph (b)(2) of_ 
this Rule shall not begin until a complete 
em'ironmental document is available for 
review. 

(c) Erosion and sedimentation control plans 
may also be disapproved unless they include an 
authorized statement of fmancial responsibility 
and ownership. This statement shall be signed 
by the person fmancially responsible for the 
land-disturbing acti\ity or his attorney in fact. 
The statement shall include the mailing and street 
addresses of the principal place of business of the 
person fmancially responsible and of the owner 
of the land or their registered agents. 

(d) Local Government Approval 

(1) Local Go\'emments administering erosion 
and sedimentation control programs shall 
develop and publish procedures for ap- 
proval of plans. Such procedures shall 
respect applicable laws, ordinances, and 
rules shall contain procedures for appeal 
consistent with the local government's 
organization and operations. 

(2) TTie secretar>' shall appoint such 
employee(s) of the department as he 
deems necessary to consider appeals from 
the local government's fmal disapproval 
or modification of a plan. \\'ithin 30 days 
following receipt of notification of the 



813 



6:13 NORTH CAROLINA REGISTER September 30, 1991 



PROPOSED RULES 



appeal, such departmental employee shall 
complete the review and shall notify the 
local government and the person appeal- 
ing the local government's decision that 
the plan should be approved, approved 
with modifications, approved with per- 
formance reservations, or disapproved. 
(3) If either the local government or the per- 
son submitting the plan disagrees with the 
decision reached by an employee of the 
Department then he may appeal the deci- 
sion to the Commission by filing notice 
within 15 days with the Director of the 
Division of Land Resources. The director 
shall make the proposed erosion control 
plan and the records relating to the local 
government's and departmental employ- 
ees review, available to an appeals review 
committee consisting of three members 
of the Commission appointed by the 
chairman. Within 10 days following re- 
ceipt of the notification of appeal, the ap- 
peals review committee shall notify the 
local government and the person submit- 
ting the plan of a place and time for con- 
sideration of the appeal, and shall afford 
both parties an opportunity to present 
written or oral arguments. The appeals 
review committee shall notify both parties 
of its decision concerning the approval, 
disapproval, or modification of the pro- 
posed plan within 30 days following such 
hearing. 

Statutory Authority G.S. II3A-2; J/3A-54; 
1I3A-54.I: ll3A-60(a); ll3A-6l(b): 

I13A-6I(c); 150B-23. 

.0025 BUFFER ZONE REQUIREMENTS 

(a) Unless otherwise provided, the width of a 
buffer zone is measured from the edge of the 
water to the nearest edge of the disturbed area, 
with the 25 percent of the strip nearer the land- 
disturbing activity containing natural or artificial 
means of confining visible siltation. 

(b) fa) The 25 foot minimum width for an un- 
disturbed buffer zone adjacent to designated trout 
waters shall be measured horizontally from the 
top of the bank. 

(c) (^ Where a temporary and minimal dis- 
turbance is permitted as an exception by G.S. 
113A-57(1), land-disturbing activities in the 
buffer zone adjacent to designated trout waters 
shall be limited to a maximum of ten percent of 
the total length of the buffer zone within the tract 
to be distributed such that there is not more than 
1 00 linear feet of disturbance in each 1 000 linear 



feet of buffer zone. Larger areas may be dis- 
turbed with the written approval of the Director. 
(d) («) No land-disturbing activity shall be 
undertaken within a buffer zone adjacent to des- 
ignated trout waters that will cause adverse tem- 
perature fluctuations, as set forth in 15A NCAC 
2B .021 1 "Fresh Surface Water Classification and 
Standards", in these waters. 

Statutory Authority G. S. ll3A-54(b); 
ll3A-54(c)(I); II3A-57(I). 

SUBCH.\PTER 4C - SEDIMENTATION 
CONTROL CIVIL PENALTIES 

.0007 PROCEDURES: NOTICES 

(a) Prior to the assessment of any civil penalty 
pursuant to G.S. 1 13A-64(a)(l) and 
1 13A-64(a)(4), notice of the violation shall be 
given the alleged violator(s) or his (their) agent(s) 
by registered or certified mail or other means 
reasonably calculated to give actual notice, such 
as service by the sheriff's department or hand 
delivery, describing the violation with reasonable 
particularity, specifying a time period for com- 
pliance and stating that upon failure to comply 
the person responsible for the violation shall be- 
come subject to the assessment of a civil penalty, 
provided that no time period for compliance need 
be given for failure to submit an erosion control 
plan for approval or for obstructing, hampering 
or interfering with an authorized representative 
while in the process of carrying out his official 
duties. 

(b) If, after the allotted time period has expired, 
the violator has not completed corrective action, 
a civil penalty may be assessed from the date of 
receipt of the notice of violation. Notice of the 
assessment shall be by registered or certified mail 
or other means reasonably calculated to give ac- 
tual notice such as service by the sheriff's de- 
partment or hand dehvery. 

(c) The stop work order provided in G.S. 
1 13A-65.1 shall serve as the notice of violation 
for purposes of assessment of a civil penalty 
pursuant to G.S. 1 13A-64(a)(5). No time period 
for compliance need to be given for failure to 
stop work pursuant to a stop work order issued 
under G.S. 113A-65.1. Copies of the stop work 
order shall be delivered to persons the Depart- 
ment has reason to believe may be responsible 
for the violation bv registered or certified mail or 
other means reasonably calculated to given actual 
notice. 

Statutory Authority G.S. I13A-54; 1I3A-64; 
I13A-65.I; I43B-I0. 



6:13 NORTH CAROLINA REGISTER September 30, 1991 



814 



PROPOSED RULES 



lyotice is hereby given in accordance with G.S. 
1 SOB- 1 2 that the Commission for Health Services, 
Department of Environment, Health, and Satural 
Resources intends to amend rule(s) cited as ISA 
NCAC 13A .0006, .0009. and .00/0. 

1 he proposed effective date of this action is 
February I, 1992. 

1 he public hearing will be conducted at 10:00 
a.m. on October 31 , 1991 at the Ground Floor 
Hearing Room, Archdale Building, SI 2 North 
Salisbury Street, Raleigh, NC. 



Co 



■ otnment Procedures: All persons interested in 
these matters are invited to attend the public 
hearing. Written comments may be presented at 
the public hearing or submitted to John P. 
Barkley, DEHSR, P.O. Box 27687, Raleigh. \C 
27611-7687. (919) 733-7247. If you desire to 
speak at the public hearing, notify John P. Barkley 
at least 3 days prior to the public hearing. Oral 
presentation lengths may be limited depending on 
the number of people that wish to speak at the 
public hearing. At the discretion of the Chairman, 
the public may also be allowed to comment on the 
rules at the Commission Meeting. 

IT IS \FRY IMPORTAST THAT ALL IN- 
TERESTED AND POTENTIALLY AF- 
FECTED PERSONS, GROUPS, 
BUSINESSES, ASSOCIATIONS, INSTI- 
TUTIONS. OR AGENCIES .MAKE THEIR 
VIEUS AND OPINIONS KNOWN TO THE 
COMMISSION FOR HEALTH SERVICES 
THROUGH THE PUBLIC HEARING AND 
COMMENT PROCESS, WHETHER THEY 
SUPPORT OR OPPOSE ANY OR ALL PRO- 
VISIONS OF THE PROPOSED RULES. THE 
COMMISSION FOR HEALTH SERVICES 
MA Y ADOPT MORE OR LESS STRINGENT 
STANDARDS OR REQUIREMENTS THAT 
MAY DIFFER FROM THOSE BEING NO- 
TICED HEREIN. WITHOUT RENOTICE OR 
REHEARING, IF THE COMMISSION FOR 
HEALTH SERVICES DETERMINES THAT 
THE FINAL ADOPTED RULES ARE A LOG- 
ICAL OUTGROWTH OF THE NOTICE, 
PUBLIC HEARINGS AND THE HEARING 
COM.MENTS RECEIVED. 

CHAPTER 13 - SOLID WASTE MANAGEMENT 



SUBCHAPTER 13A - HAZARDOUS WASTE 
MANAGEMENT 

.0006 IDENTIFICATION AND LISTING OF 
HAZARDOUS WASTES - PART 261 

(d) 40 CFR 261.30 through 2^hU 261.35 
(Subpart D), "Lists of Hazardous Wastes" have 
been adopted by reference in accordance with 
G.S. 150B-14(c). 

Statutory' Authority G.S. l30A-294(c). 

.0009 STANDARDS FOR OWN.ERS/ 
OPER.\TORS OF HWTSD 
FACILITIES - PART 264 

(s) 40 CFR 264.570 through 264.575 (Subpart 
W), "Drip Pads", ha\'e been adopted by reference 
in accordance with G.S. 150B-14(c). 

[t] H 40 CFR 264.600 through 264.603 (Sub- 
part X), "Miscellaneous Units", have been 
adopted by reference in accordance with G.S. 
150B-14(c). 

fu] (4) 40 CFR 264.1030 through 264.1049 
(Subpart AA), "Air Emission Standards for 
Process Vents", have been adopted by reference 
in accordance with G.S. 150B- 14(c). 

(vi (») 40 CFR 264.1050 through 264.1079 
(Subpart BB), "Air Emission Standards for 
Equipment Leaks", have been adopted by refer- 
ence in accordance with G.S. 1 SOB- 14(c). 

(w) (v) Appendices to 40 CFR Part 264 have 
been adopted by reference in accordance with 
G.S. 150B-14(c). 

Statutory Authority G.S. 130A-294(c). 

.0010 INTERIM STATUS STDS FOR 
0\\>ERS-OP OF HWTSD 
FACILITIES - PART 265 

(r) 40 CFR 265.440 throu.gh 265.445 (Subpart 
W), "Drip Pads" have been adopted bv reference 
in accordance with G.S. I50B-14(c). 

[s] ff) 40 CFR 265.1030 through 265.1049 
(Subpart AA), ".Air Emission Standards for 
Process Vents", have been adopted by reference 
in accordance with G.S. 150B- 14(c). 

(12 (^ 40 CFR 265.1050 through 265.1079 
(Subpart BB), "Air Emission Standards for 
Equipment Leaks" have been adopted by refer- 
ence in accordance with G.S. 150B- 14(c). 

(u) (t) Appendices to 40 CFR Part 265 have 
been adopted by reference in accordance with 
G.S. 150B-14(c). 

Statutory Authority G.S. l30A-294(c). 



815 



6:13 NORTH CAROLINA REGISTER September 30, I99I 



FINAL RULES 



A dopted rules filed by the Departments of Correction, Revenue and Transportation are published 
in this section. These departments are not subject to the provisions ofG.S. J50B, Article 2 requiring 
publication in the N.C. Register of proposed rules. 

Upon request from the adopting agency, the text of rules will be published in this section. 



TITLE 17 
DEPARTMENT OF REVENUE 

CHAPTER 5 
CORPORATE INCOME AND FRANCHISE TAX DIVISION 

SUBCHAPTER 5B - FRANCHISE TAX 

SECTION .0100 - GENERAL INFORMATION 

.0104 INACTFVE CORPORATIONS 

A corporation that is inactive and without assets is subject annually to a minimum franchise tax. A 
return is required containing a statement of the status of the corporation. Failure to fde this return and 
pay the minimum tax will result in suspension of the articles of incorporation or certificate of authority. 

History Note: Statutory Authority G.S. 105-114; 105-262; 
Eff February 1, 1976; 
Amended Eff. November 1, 1991 ; November 1 , 1987. 

SUBCHAPTER 5C - CORPORATE INCOME TAX 

SECTION .0900 - PAYROLL FACTOR 

.0904 THE TERM EMPLOYEE 

(a) The term "employee" means: 

(1) any officer of a corporation, or 

(2) any individual who, under the usual common-law rules applicable in determining the 
employer-employee relationship, has the status of an employee. 

(b) Generally, a person wLU be considered to be an employee if he is included by the taxpayer as an 
employee for purposes of the payroll taxes imposed by the Federal Insurance Contributions Act; except 
that, since certain individuals are included within the term "employees" in the Federal Insurance Con- 
tributions Act who would not be employees under the usual common-law rules, it may be established 
that a person who is included as an employee for purposes of the Federal Insurance Contributions Act 
is not an employee for purposes of this Regulation. 

History Note: Statutory Authority G.S. 105-130.4; 105-262; 
Eff February 1, 1976. 

SECTION .2100 - DISSOLUTIONS AND WITHDRAWALS 

.2101 DISSOLUTIONS 

(a) The "Business Corporation Act" provides for the dissolution of corporations immediately upon 
the effective date of filing the articles of dissolution with the Secretary of State. Although a tax clear- 
ance is no longer a part of the Secretary of State's dissolution process, this in no way relieves the cor- 
poration of its liability to file all tax reports and returns due and pay all taxes due the Department of 
Revenue. The Department wiU continue to notify a corporation of any unfilled tax requirements. 

(b) After the end of the year in which dissolution occurs, a dissolved corporation is not subject to the 
annual franchise tax unless the corporation engages in business activities not appropriate to winding 
up and liquidating its business and affairs. 



6:B NORTH CAROLINA REGISTER September 30, 1991 816 



FINAL RULES 



History Note: Statutory Authority G.S. 55-/4-0/; 55-/4-02; 55-/4-03; /05-262; 
Eff. February / , /976; 
Amended Eff. November /, /99/; April /, /99/. 

.2102 NMTHDRAWALS 

(a) Before a foreign corporation is permitted to withdraw its certificate of authority to do business in 
North Carolina, it must file all tax reports and returns due and pay all taxes due. The Revenue De- 
partment is required to make a certification of such fact to the Secretary of State before withdrawal is 
permitted. The same general procedure foUowed with respect to dissolution, of notifying a corporation 
of any unfilled tax requirements, will also be followed for corporations withdrawing from North 
Carolina. 

(b) A corporation which is dissolving or withdrawing is required to file an income tax return for the 
current year within 75 days after the close of business in this state. In this fmal return, the corporation 
must include in income any unrealized, deferred or unreported profit from installment sales and pay the 
tax due with such return before its dissolution or withdrawal is approved. 

History Note: Statutory Authority G.S. 55-/5-20; /05-262; 
Eff February /, /976; 
Amended Eff November I, 199/: April /, /99/. 

SECTION .2600 - REINST.ATEMENT OF CORPORATE CHARTER 

.2601 REESSTATE.MENT OE CORPOR.ATE CHARTER 

(a) A domestic corporation (incorporated in North Carolina) certified for suspension of its Corporate 
Charter to the Secretary of State's office with an effective "suspended" date on or after July 2, 1985 
may be reinstated without regard to the elapsed suspension period provided all returns are filed with 
remittance of the tax, interest and penalty due, plus the reinstatement fee of twenty-five doDars ($25.00). 

(b) A foreign corporation (incorporated outside North Carolina) certified for suspension of its Cer- 
tificate of Authority to the Secretary of State's office may be reinstated without regard to the elapsed 
suspension period provided aU returns for years since securing the Certificate and/or since commencing 
business in this State are filed with remittance of tax, interest and penalty due, plus the reinstatement 
fee of twenty-five doUars ($25.00). 

History Note: Statutory Authority G.S. / 05-230; / 05-232; 
Eff November /. /99/. 

CHAPTER 7 
SALES AND USE TAX 



SUBCHAPTER 7B - STATE SALES AND USE TAX 
SECTION .0100 - GENERAL PROVISIONS 



.0101 IMPOSITION OF AND LIABILITY FOR COLLECTESG AND REMITTING TAX 

(a) All retail sales of tangible personal property are subject to the four percent (three percent until 
July 16, 1991), three p>ercent, two percent or the one percent sales or use tax unless specifically exempt 
by statute. Effective Januar>' 1, 1985, the gross receipts derived by a utility from sales of electricity, 
piped natural gas or intrastate telephone service are subject to the three percent state rate of sales tax, 
other than receipts from the sale of electricity by a municipality whose only wholesale supplier of 
electric power is a federal agency and who is required by contract with that federal agency to make 
payments in lieu of taxes. The statute was amended effective January 1, 1989, to substitute the term 
"local telecommunications services" for the term "intrastate telephone service," as used in the above 
sentence, and to le\7 the three percent rate of tax only on receipts derived from local telecommuni- 
cations services as defmcd by G.S. 105- 120(e). A new subdivision, G.S. 105-164.4 (a) (4c) was added, 



817 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



effective January 1, 1989, which levies a six and one-half percent sales tax on the gross receipts derived 
from toll or private telecommunications services, as defined by G.S. 105-120(e), that both originate 
from and terminate in the state. The provisions of G.S. 105-164.4 (a) (c) do not apply to telephone 
membership corporations as described in Chapter 117 of the General Statutes. The gross receipts de- 
rived by a utility from sales of electricity, piped natural gas and telecommunications services are not 
subject to the local sales or use tax. Wholesale sales are not subject to the tax if made pursuant to the 
conditions set forth in the statutory defmition of wholesale sale. Ever>' person making retail sales of 
taxable tangible personal property or charges for taxable utility services is required to register with the 
department and collect and remit all tax due on such sales. 

(b) A use tax at the applicable rate is levied on taxable tangible personal property purchased or re- 
ceived from within or without this state for storage, use or consumption in this state. The liability for 
the tax is not extinguished until it is fuUy paid, except that payment of the tax to a vendor who charges 
such tax shall relieve the purchaser of further liability with respect to the tax so paid. Where retail sales 
or use tax is due and has already been paid in another state by the purchaser with respect to such tan- 
gible personal property, such tax may be credited against the North Carolina use tax due thereon. If 
the tax paid in another state is less than the North Carolina use tax due, the difference must be paid in 
this State. Effective July 1, 1981, no credit shall be allowed for sales or use taxes paid in another state 
if that taxing jurisdiction does not grant similar credit for sales taxes paid in North CaroHna. Every 
person outside this state who is engaged in business in this state, as hereinafter defined, is required to 
register with the department and collect and remit the tax due on all taxable tangible personal property 
sold or delivered for storage, use or consumption in this state. Every person who purchases from 
out-of-state vendors any taxable tangible personal property for storage, use or consumption in this state 
upon which the tax has not been fuUy paid must register with the department and remit the tax due 
on such purchases. A fee is not required for registration by a consumer and a license is not issued in 
connection with such registration; however, all registrants will be furnished report forms to be used Ln 
reporting and remitting all tax due. 

(c) Effective October 1, 1989, retail sales of motor vehicles are exempt from sales tax and are subject 
to the three percent highway use tax with a minimum tax of forty dollars ($40.00) applicable thereto, 
with certain exceptions, and a maximum tax of one thousand dollars ($1,000.00) on any one motor 
vehicle increasing to one thousand five hundred dollars ($1,500.00) July 1, 1993. Reference is made to 
17 NCAC 7B .4601 for the treatment of sales of motor vehicles. 

(d) Effective January 1, 1990, all retail sales of motor vehicle tires are subject to the one percent scrap 
tire disposal fee. New motor vehicle tires purchased within or without this state for use in this state 
are subject to the one percent fee on their cost price. 

(e) Effective July 1, 1991, a privUege tax is imposed at the rate of one percent on the sales price of 
each new tire sold at retail by a retailer and on the sale of each new tire by a retail or wholesale mer- 
chant to a retail or wholesale merchant for placement on a vehicle offered for sale, lease or rental by 
the retail or wholesale merchant. An excise tax at the rate of one percent is imposed on the cost price 
of each new tire purchased from outside the state for storage, use or consumption in this state or for 
placement in this state on a vehicle offered for sale, lease or rental. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.5; 105-164.6; 105-262; 
Eff. February 1, 1976; 
Amended Eff. October I, 1991; October I, 1990; May I, 1990; August I, 1986. 

.0104 REPORTS 

(a) Ever>' person engaged Ln the business of selling tangible personal property at retail or making 
purchases subject to the use tax and whose total tax liability is consistently less than twenty thousand 
dollars ($20,000.00) per month must file on or before the 15th day of each calendar month a true and 
correct report, in such form as the Department shall prescribe, of all taxes due for the preceding cal- 
endar month and shall remit the taxes due with such monthly report. When the total amount of tax 
for which a taxpayer is liable for any month is consistently less than twenty-five dollars ($25.00) 
[increasing to fifty dollars ($50.00) effective July 1, 1992], such taxpayer may, in lieu of filing monthly 
returns, file a quarterly return with remittance of tax due on or before the 15th day of January, April, 
July and October of each year for the preceding three months' period upon making application to the 
Secretary to use such basis of filing. A report must be filed for each reporting period showing gross 
sales and/or receipts and an itemization of all exempt sales or receipts which are not included in the 
computation of tax due. Reports for periods Ln which no sales are made should be marked "no 
sales." 



6:B NORTH CAROLINA REGISTER September 30, 1991 __ 818 



FINAL RULES 



(b) A taxpayer who is consistently liable for at least twenty thousand dollars ($20,000.00) per month 
In state and local sales and use taxes shall, as directed by the Secretary of Revenue, fde a return on a 
semimonthly basis. Returns of taxpayers who are required to report on a semimonthly basis are due 
within ten days after the end of each semimonthly period. The semimonthly reporting periods are the 
first day of each month through the 15th day of each month and the 16th day of each month through 
the last day of each month. In detennining the amount of tax due from a taxpayer for a reporting 
period, the Secretary shall consider the total amount due from all places of business owned and oper- 
ated by the same person as the amount due from that person. 

(c) Taxpayers who are directed to remit sales and use tax on a semimonthly basis but are unable to 
compile the information required to subrnit a complete sales and use tax report on or before the due 
date for either the first reporting period or both the first and second reporting periods may, upon written 
authorization of the Secretary of Revenue, file an estimated report for either or both periods on the 
basis prescribed by the Secretary. Once a taxpayer has recei\ed authorization, he may continue to fde 
estimated returns until such authorization is revoked by the Secretary. 

(d) W'Tien fding a return for the second period, a ta.xpayer who fdes an estimated return for the first 
period but not for both periods must remit the amount of tax due for both periods less the amount of 
tax remitted with the estimated return. A taxpayer who fdes an estimated return for both periods is 
considered to have been granted an extension for both p>eriods. If a taxpayer who fdes estimated returns 
for both periods tiles a reconcding return for those f>eriods within ten days of the due date of the return 
for the second p»eriod and any underpayment of estimated taxes remitted with the reconciling return is 
less than ten percent of the amount of taxes due for both reporting periods, no interest is due. Other- 
wise, a taxpayer who fdes an estimated return for both periods is required to pay interest from the due 
date of the return for the first period to the date the reconciling return is fded. If such report is not fded 
within the applicable time, penalties as pro\ided by statute will attach thereto. 

(e) Ta.xpayers who are authorized to fde an estimated report for each or both reporting periods shall 
fde a report reflecting thereon their estimated taxable receipts, rentals and or sales, any taxable pur- 
chases of tangible personal property for storage, use or consumption in this state and shall compute 
and pay the amount of tax thereon. Taxpayers who have more than one location in North Carolina 
and fde a consolidated report with a schedule of state tax due by each location are required to fde such 
schedule with their estimated report. Also, taxpayers who remit county tax for more than one county 
and fde a schedule showing a breakdown of the local tax due for each county are required to fde the 
schedule with their estimated report. 

(f) Every person engaged m the business of providing electricity, piped natural gas, local telecom- 
munications service and toll and private telecommunications services is required to fde a utdities and 
municipalities sales tax report on a monthly basis on or before the last day of the month following the 
close of the month except those firms pro\iding local telecommunications services which are authorized 
by the Franchise Tax Section to fde franchise tax reports on a calendar quarterly basis. 

(g) A person who engages exclusively in the business of making wholesale sales is not required to fde 
monthly reports. However, if in addition to making wholesale sales, such person makes taxable sales 
to users or consumers or nonregistered merchants or makes purchases subject to the use tax, he is re- 
quired to fde semimonthly, monthly or quarterly reports as provided by statute. 

(h) Ever,' person engaged in the business of providing electricity, piped natural gas. local telecom- 
munications service and toU and private telecommunications ser\ ices is required to tile a monthly return 
except that a utility allowed to pay tax under G.S. 105-120 on a quarterly basis shall fde a quarterly 
return. A quarterly return is due by the last day of the month following the quarter covered by the 
return. A monthly return is due by the last day of the month following the month in which the tax 
accrues, except the return for tax that accrues in May is due by June 25th of each year. A utility that 
is required to file a monthly return may fde an estimated return for the tirst month, the second month 
or both the first and second months of the quarter. 

A utdity is not subject to interest on or penalties for an underpayment submitted with an estimated 
monthly return if the utility timely pays at least 95 percent of the amount due with a monthly return 
and includes the underpayment with the company's return for the third month of the same quarter. 

(i) E\er%" person who purchases from out-of-state vendors taxable tangible personal property for 
storage, use or consumption in this state upon which the tax has not been fuUy paid must fde reports 
on a semimonthly, monthly or quarterly basis as provided by statute and report all such purchases and 
remit the applicable tax due thereon. 



History Sole: Statutory Authority G.S. 105-164.16; 105-164.17: 105-262; 
Eff. February I, 1976; 



819 6:13 NORTH CAROLINA REGISTER September 30, 1 99 1 



FINAL RULES 



Amended Eff. October I, 1991; October I, 1990; April I, 1986; February I, 1986. 

.0109 APPLICATION OF TAX TO FISH BAIT 

Sales of bloodworms, shrimp or seafood to users other than commercial fishermen for bait are subject 
to the four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax 
except when such products are sold in their original or urunanufactured state by the producer in his 
capacity as the producer. 

History Note: Statutory Authority G.S. 105-164.4; 105-262; 
Eff. February I, 1976; 
Amended Eff October I, 1991. 

.0111 STAMPS, COINS, ETC. 

Persons engaged in the business of selling collectible stamps, coins and related items to collectors 
thereof must register with the Department of Revenue for the purpose of collecting and remitting the 
four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax on 
such sales. Sales of stamps through vending machines or in any other manner for use as United States 
postal fees are exempt from the tax. Casual or isolated sales of coins and stamps by individuals who 
are not engaged in the business are exempt from tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.3; 105-262; 
Eff February I. 1976; 
Amended Eff October I, 1991; March I, 1984. 

.0115 RESEARCH SERVICES 

Sales of scientific or research equipment to independent contract research organizations for use in 
performing research services for clients are subject to the four percent (three percent untU July 16, 1991) 
state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February I. 1976; 
Amended Eff October I, 1991. 

.0116 COMPUTER SOFTWARE 

(a) The retail sale of all canned or prewritten computer programs, either in the form of written pro- 
cedures or in the form of storage media on which or in which the program is recorded, held or existing 
for general or repeated sale, lease or license to use or consume is subject to the four percent (three 
percent untU July 16, 1991) state tax and any applicable local sales or use taxes. Computer program 
means a complete plan for the solution of a problem, such as the complete sequence of automatic data 
processing equipment instructions necessary to solve a problem, and includes both systems and appli- 
cation programs and subdivisions, such as assemblers, comphcrs, routines, generators and utility pro- 
grams. The foUowing examples set forth for illustrative purposes: 

(1) When a vendor sells programs for use with home television games or other personal computer 
equipment which are wholly usable without modification by the vendor, the sale, lease or license 
to use such programs is subject to sales or use tax. 

(2) When a consultant not in business as a vendor of computer programs performs consulting ser- 
vices only under a performance contract and recommends a program which the customer pur- 
chases from a vendor without modification, the sale, lease or license to use such program is 
subject to sales or use tax. 

(3) When a consultant not in business as a vendor of computer programs performs consulting ser- 
vices under a performance type contract, the consultant is liable for the four percent (three per- 
cent until July 16, 1991) state tax and any applicable local sales or use tax on the cost price of 
all taxable tangible personal property purchased for use in the performance of the contract in- 
cluding any canned or prewritten programs purchased for use without modification by the ven- 
dor. 

(b) Charges for the design, development, writing, fabrication, lease or license to use or consume or 
the transfer of title or possession of a custom computer program, except a basic operational program 
which is a part of the hardware, either in the form of written procedures or in the form of storage media 
on or in which the program is recorded or any of the required documents or manuals that are designed 



6:15 NORTH CAROLINA REGISTER September iO, 1991 S20 



FINAL RULES 



to facilitate the use of the custom computer program are exempt from sales or use taxes. "Custom 
computer program" means a computer program prepared to the special order of the customer. Custom 
computer programs include one of the following elements: 

(1) Preparation or selection of the program for the customer's use requires an analysis of the cus- 
tomer's requirements by the vendor. The following examples are set forth for illustrative pur- 
poses: 

(A) A computer programmer, a consultant, a qualified representative of the computer software 
firm or a hardware manufacturer who is the vendor of computer software programs may visit 
the customer's premises to determine the customer's needs or requirements and then analyze the 
software needs of the customer so as to enable the customer to accomplish the desired specific 
function or functions of the customer's electronic data processing equipment and on the basis 
of such analysis seU the customer computer software programs. The sale by such vendor of the 
software programs that result from such analysis qualify for the exemption from tax as custom 
computer programs whether such programs are designed, developed, written, translated, fabri- 
cated, leased, licensed to use or consume, or transferred for a consideration of title or possession 
by the vendor or whether they are held for general or repeated sale by such vendor and whether 
or not they qualify as a canned or prewritten program and would otherwise be taxable. 

(B) A customer with sufficient knowledge of his business operations and needs for 
computerization thereof and the specific operations that he wants to accomplish with computer 
hardware may visit a vendor's place of business and after a discussion with a qualified repre- 
sentative of the software outlet be supplied with appropriate software based upon the analysis 
of the customer's needs by the vendor and, in such case, the computer software program would 
be a custom computer program and exempt from sales or use taxes. Of course, it will be 
incumbent upon the vendor to provide written documentation that an analysis as contemplated 
by the statute was, Ln fact, made by the vendor. 

(2) The program requires adaptation by the vendor to be used in a particular make and model of a 
computer using a specified output device. A specified output device is a piece of hardware at- 
tached to a computer that assists in the operation, such as video terminals, printers, disc drives 
or tape drives. The process of adaptation by the vendor can be as simple as changing the code 
on a particular program so that such program will be acceptable to or accepted by a specified 
output device of a different manufacturer than the central processing unit. When a vendor sells 
a canned or prewritten program which requires adaptation in whole or in part by the vendor to 
be used Ln a particular make and model of a computer utihzing a specified output device, the 
program is considered to be customized and the sale, lease or license to use or consume same 
is exempt from sales or use tax. 

(c) Systems and programming services: Services involved in the analysis, design and programming 
of an electronic data processing system are exempt, whether the services are used for the initial devel- 
opment or modification of the computer software or the data processing system. A person providing 
the preceding exempt services for his customers is subject to the applicable sales or use taxes on all 
purchases of tangible person property used to provide such sen,'ices, notwithstanding the fact that some 
part of the property may later be transferred to the customer with the exempt service. 

(1) Charges for services to modify or update existing software, to meet additional processing proce- 
dures or new procedures being employed by the users of the software program, are not subject 
to sales or use tax. 

(2) When a programmer goes to a customer's location to analyze a customer's requirements and 
designs a program to solve a problem and after a program is written it is keypunched by the 
customer and introduced into his own computer system for use, the charge therefor is for ser- 
vices rendered which are not subject to sales or use tax. 

(d) Time sharing: Charges made to customers for the use of a computer which the customer has 
access to through a remote terminal device are not deemed to be a taxable transfer of possession of the 
computer. 

(e) Data processing ser\ices: Information sen'ices are commonly provided by data processing centers. 
An information service may consist of a data processing company using its own facilities to process its 
customer's data to record information. The data may be provided to the data processing company in 
source document forms, as machine readable medium or entered directly into the company's computer 
facilities by devices located at the customer's premises. Information services are not subject to tax when 
the output is personal or individual in nature to the purchaser and the object of the transaction is to 
obtain the information and not to obtain tangible personal property for use or consumption. 



821 6:13 NORTH CAROLINA REGISTER September 30, 1 991 



FINAL RULES 



(f) The retail sale, lease or rental of electronic data processing equipment and paraphernalia equip- 
ment, commonly referred to as hardware, is subject to sales or use tax. Examples of hardware are: 



(1 
(2 
(3 

(4; 
(5; 
(6; 

(7 

(8 

(9 

(10 

(11 

(12; 

(13 

(14; 

(15 

(16; 

(17 
(18 
(19 
(20 
(21 



central processing units; 

card punch machines; 

card readers; 

verifiers; 

sorters; 

card converters; 

collators; 

printers; 

panels; 

data entry equipment; 

unit record equipment; 

point of sale devices; 

terminals (video and hard copy); 

modems; 

electronic message scramblers; 

bursters; 

security monitors; 

flexowriters; 

decollators; 

data storage devices (e.g. disc drives, tape drives); 

blank cards, discs and tapes, 
(g) For the purpose of this Rule, the basic operational program or control program which controls 
the basic operations of the computer causing it to execute instructions contained in the program is an 
integral part of the computer hardware. A basic operational program is that part of an operating sys- 
tem, including supervisors, monitors, executives, and control or master programs, which consists of the 
control program elements of that system. A control or master program, as opposed to a processing 
program, controls the operation of a computer by managing the allocation of all system resources, in- 
cluding the central processing unit, main storage unit, input/output devices and processing programs. 
Such basic operation programs or control programs are considered part of the hardware subject to sales 
or use taxes. The fact that the vendor does or does not charge separately for such programs or that such 
programs are prepared to the specifications of the customer is immaterial. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1, 1976; 
Amended Eff- October 1, 1991; May 1. 1985; December 1, 1982; January 1, 1982. 

.0126 HOLY BIBLES 

Effective April 22, 1991, the exemption from tax for sales of Holy Bibles is repealed. This change is 
pursuant to the May 10, 1990, United States Court of Appeals ruling that declared the exemption un- 
constitutional. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.13; 105-262; 
Eff. October 1, 1991. 

SECTION .0200 - GENERAL APPLICATION OF LAW TO .MANUFACTURING AND 

INDUSTRIAL PROCESSING 



.0202 CLASSIFICATION OF MANUFACTURESG ACTFVITIES 

(a) For the purposes of interpreting and administering the Sales and Use Tax Law the following 
classifications are based on the three principal activities of manufacturers and industrial processors and 
should be followed by persons selling and by manufacturers purchasing tangible personal property 
which is used or consumed in different phases of the operation of an industrial plant: 

(1) Production as a phase of industrial or manufacturing operations shall mean all steps performed 
in processing and refining rooms, and in other quarters and departments of a plant, where con- 
ditioning, treating or other operations are done on ingredient materials as an actual routine on 
a processing or assembly line turning out a finished product of manufacture. It shall also include 



6:U NORTH CAROLINA REGISTER September iO, 1991 822 



FINAL RULES 



the movement of raw materials or ingredients from an inventory' or a stockpile located on the 
premises of the manufacturing facility' to the assembly or processing Line, the movement of goods 
in process along the processing line and the movement of manufactured products from the as- 
sembly or processing line into shipping or storage areas and yards located on the premises of the 
manufacturing facility. Sales to a manufacturing industry or plant of machiner>', and parts and 
accessories therefor for use in production, as defmed above, are classified as mill machmen,' and 
mill machinery parts and accessories. The term production shall also mean the work of exper- 
imentation and research performed on the manufactured products. Sales to a manufacturing 
industPr' or plant of research and development equipment and supplies for quality control or the 
improvement of its manufactured products or for the development of products which it will 
manufacture are classified as mill machinery and miU machinery parts and accessories. Items 
which are not classified as mill machinery and mill machinery parts and accessories when pur- 
chased by manufacturing industries and plants for use in their research and de\elopment areas 
include such items as desks, calculators, personal computers and chairs and are subject to the 
four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 
Production does not include any activity connected with the movement of raw materials or in- 
gredients into inventory nor does it include distribution as defmed in (a)(2) of this Rule. Sales 
to manufacturing industries and plants of machinery, parts and accessories to such machinen,', 
or other items of tangible personal property which are used in the mo\ ement of raw materials 
or ingredients into in\entory or in distribution activities as defmed or which are used for other 
similar purposes are subject to the four percent (three percent until July 16, 1991) state tax and 
any applicable local sales or use tax without any maximum tax. 

(2) Distribution with reference to industrial and manufacturing plants shall mean any acti\ity con- 
nected with the movement of manufactured products within storage warehouses, shipping rooms 
and other such finished products storage areas and the removal of such products therefrom for 
sale or shipment. Sales of distribution equipment to manufacturing industries and plants are 
subject to the four percent (three percent until July 16, 1991) state tax and any applicable local 
sales or use tax. 

(3) Administration with reference to industrial and manufacturing plants shall mean and include the 
administrative work of offices, promotion of sales and collection of accounts. Sales of admin- 
istrative equipment, such as office equipment of all kinds, stationer.' and related articles such as 
pens, pencils, rubber stamps, paper cutters, printed forms, books of accounts and records, fde 
cabinets, small tools and implements such as scissors, staplers, desk trays, and other miscella- 
neous articles generally sold exclusively for office use and furniture and fixtures are subject to the 
four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

(b) Any question regarding the appUcation of the proper rate of tax, the classification of a purchaser 
for sales and use tax purposes, or the exempt status of certain transactions should be submitted to the 
department for determination: Persons selling or persons purchasing articles subject to the eighty 
dollars ($80.00) ma.ximum tax are cautioned not to treat as one article two or more ailicles which, when 
joined together, make a functional unit or several components of machinery' or equipment purchased 
from the same or different vendors which may be assembled by the purchaser into a single article. The 
purchase of a quantity of repair parts necessary to recondition or upgrade rrull machiner>" is not con- 
sidered a single article. If there is any question as to whether property involved in any transaction in- 
volves one or more articles, such question should be submitted to the department for decision. 

History Xote: Statutory Authoritv G.S. 105-164.4; 105-164.6; 105-262; 105-264: 
Eff. February 1, 1976; 
Amended Eff. October 1, 1991; September 30, 1977. 

SECTION .0300 - SPECIFIC T.\NGIBLE PERSONALTY CLASSIFIED FOR USE BY 

rSDLSTRIAL USERS 



.0301 MILL MACHESERY 

Sales of mill machinery, mill machiner>' parts and accessories to manufacturing industries and plants 
for industrial processing are subject to the one percent sales or use tax, subject to a maximum tax of 
eighty doUars ($80.00) per article where applicable. The following items, when sold to manufacturing 
industries and plants for use in their manufacturing process, are considered mill machiner>', rrull ma- 
chinery' parts and accessories within the meaning of the Sales and Use Tax Article: 



823 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



(1) motors, pulleys, motor bases but not foundations, gears, belts, chains and textile rope drives, line 
shafting with hangers and pulleys, and other types and makes of drives connecting motors to the 
driven machinery for direct production processes; 

(2) controls for motors consisting of: 

(a) magnetic starters, push button stations, pressure and float switches, and other types of relays 
operating motor controllers; 

(b) compensators of auto transformer starters; 

(c) thermal relay types of motor starters; 

(d) drum controllers and resistors; 

(e) disconnecting switches when built as a part of magnetic starters; 

(f) oil switches; 

(g) synchronous motor controllers if a part of production machinery, but not otherwise; 

(3) repair and renewal parts for motors and motor controllers as production machinery; 

(4) steam engines, gasoline engines, diesel engines, motor generators; 

(5) pumps for industrial processes, air compressors, air hoses and nozzles, and pipe for carrying 
compressed air from compressor to hose for cleaning machinery and equipment; pumps used to 
remove waste of a manufacturing process; 

(6) moistening or humidifying equipment on or adjacent to machinery when the function of this 
equipment is the conditioning of materials for processing; This includes piping located on or im- 
mediately adjacent to mill machinery and which supports and supphes water to moistening or 
humidifying equipment, but does not include general piping in the mill supplying water to 
moistening or humidifying equipment. General piping in the mill is taxable at the state rate of four 
percent (three percent until July 16, 1991) and any applicable local sales or use tax; 

(7) that portion of the purchase price of general air conditioning systems allocated to conditioning 
materials for processing; 

(8) boiler room machinery with flue cleaners, and brushes for boiler tubes, when the boUers are 
operated for power generation or supplementary thereto in connection with manufacturing proc- 
esses; stokers, shovels, and other equipment used in boiler rooms for feeding fuels and water to 
power units; Smoke stacks which are attached to and are a part of the boHers; Equipment as used 
here does not include storage places for fuels and water, or reserve tanks, bins or other similar items 
located either inside or outside power rooms or buildings. Storage tanks, bins or other facilities 
for water, fuel, raw materials or manufactured products are not considered as mill machinery or 
accessories to such machinery and are therefore subject to the four percent (three percent until July 
16, 1991) state tax and any applicable local sales or use tax. However, tanks, bins and other fa- 
cilities m which mixing, blending or other processing action takes place are classified as miU ma- 
chinery or accessories and are therefore subject to the one percent rate of tax when such items are 
used in the manufacturing operation; 

(9) conveyors, hoists and hoist cables, (but not track or other fixtures determined to be a part of and 
which lend support to the building or structure) roving trucks and other materials handling 
equipment, including lift trucks, used in individual mills for transporting materials or spindles or 
like articles from inventory to the manufacturing process, transporting materials during temporary 
interruptions in the manufacturing process in the miU or moving the fmished product from the 
manufacturing or processing line into shipping and storage areas or yards at the individual miU or 
plant; Included for the purpose of this Paragraph are work tables, with seats and other accessories 
thereto at which employees work on materials in process; racks, bins, canvas baskets and similar 
equipment for handling goods in process; and roving cans; 

(10) hand tools designed for use on a particular machine, such as special wrenches supplied by makers 
of textile machinery for special macMnes; hammers, screwdrivers, blow torches, soldering irons, 
rubber mallets and similar general-use tools and machines used in repair shops to repair miU ma- 
chinery or along the production line to perform work necessary as a part of the manufacturing 
processes and all files for general and specific use in a mill or manufacturing plant; 

(11) metal-cutting and wood-cutting lathes and their accessories in all kinds of manufacturing plants, 
factories and mills; band saws, circular saws, all hack saws and blades; shapers and accessories, 
jointers, planers; drill presses; welding machines; torches; and aU other manufacturing machinery 
and accessories thereto; spinners' whisks, comber brushes and other brushes, in hosiery nulls and 
cotton mills, designed for use on particular machines; poUshing wheels, sanding machines and 
drums, portable or stationary; sandpaper, emery cloth, rubbing tow, paint brushes and filler 
brushes, steel wool, rubbing waste or cloths or other hand or machine devices for polishing or 
other finishing processes on a manufactured product; oils and lubricants for use in lubricating 



6:13 NORTH CAROLINA REGISTER September 50, 1991 824 



FINAL RULES 



production machinery; and wiping cloths, cleaning compounds and paint for mill machiner,', mill 
machinery' parts and accessories; chemicals or other materials used to clean ingredient or com- 
ponent parts of manufactured products but which do not enter into or become an ingredient or 
component part of property being manufactured; 

(12) dyehouse thermometers, recording charts for mill machinery, hank scales and yam scales; and 
tachometers and other testing devices used for checking performance or output of machiner}-; 

(13) air compressors, steam hose and air hose for cleaning mill machinery; 

(14) cloth pencils and mill crayons for marking cloth, lumber or other ingredients in process; 

(15) d\namite and other explosives used in mining and quarr>"ing whether or not such mining or 
quarrying is carried on as a regular or continuous business within itself, or as a part of a manu- 
facturing industr>'; Sales of explosives used in excavation in cormection with building or con- 
struction are subject to the four percent (three percent untU July 16, 1991) state tax and any 
applicable local sales or use tax; 

(16) machinen,' and equipment used in packaging manufactured products as a part of the manufac- 
turing process. 

History Note: Statutory Authority G.S. 105-164.4: 105-164.6; 105-262; 
Eff. Februar\' 1, 1976; 
Amended Eff. October 1, 1991; January 3, 1984. 

.0302 ITEMS NOT MILL MACHLSERV 

The following items are not considered mill machinery or null machinery parts and accessories to 
manufacturing industries and plants and are therefore subject to the four percent (three percent until 
July 16. 1991) state tax and any applicable local sales or use tax: 

(1) tangible personal property attached to or in any way a part of any building or structure of any 
kind whatsoever; freight elevators; plumbing and sprinkler systems; electric wiring and electric fix- 
tures; electric lamps and tubes; and fuses and fuse Unks; Electrical equipment, including control 
panels, or wiring and related conduit affixed to mill machinery" to furnish power to mill machinery' 
and equipment, is classified as an accessor}' to such machiner,' and is therefore subject to the one 
percent rate of tax; however, electrical equipment or wiring and related conduit uhich is used for 
general distribution of power to or in a manufacturing iadustry or plant is subject to the four 
percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax; 

(2) that part of the purchase price of a general air conditioning or humidifying system charged to 
general building heating or cooling or to moistening of air for the comfort and convenience of 
employees; 

(3) ventilating fans in walls or roofs of buildings and portable or stand type fans for plant \'entilation; 
make-up air systems used for the purpose of ventilating manufacturing industries and plants; 
However, exhaust fans or hoods that are a part of mill machiner,' and which remove fumes, vapors 
or dust arising from the manufacturing operation which would damage the product in process or 
the mill machinerv' unless removed from the area would be classified as rrull machiner,' or mill 
machiner)' parts and accessories and subject to the one percent rate of tax; 

(4) all scales not used in the manufacturing process; 

(5) time clocks and cards, and all signal systems operated therewith; watch clocks and watch clock 
stations; and all parts and supplies therefor; 

(6) protective clothmg, such as gloves, safety shoes and similar items, regardless of whether they are 
purchased and paid for by the employer or the employee; 

(7) machiner)' and equipment used in warehouses, shipping rooms or other locations separate and 
apart from the manufacturing process to prepare property for shipment. 

History Sote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976: 
Amended Eff October 1, 1991. 

SECTION .0400 - SPECIFIC FSDLSTRIES 



.0403 BOTTLING PLANTS 

(a) Sales to bottling plants of bottling machinery' and parts or accessories therefor are ta.xable at the 
rate of one percent subject to a ma.ximum tax of eighty dollars ($80.00) per article. Sales to bottling 



825 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



plants of lubricants for such machinery and cleaning compounds for bottles and bottling machinery are 
likewise subject to the one percent rate of tax. 

(b) Sales to bottling plants of bottles, bottle caps, crates and cartons in which manufactured products 
are sold and delivered to retail or wholesale customers are exempt from the tax. Amounts charged as 
deposits on beverage containers which are returnable to vendors for reuse and which amounts are 
refundable or creditable to vendees are exempt from sales tax, whether or not said deposits are sepa- 
rately charged. 

(c) Sales of the following items of tangible personal property to operators of bottling plants are sub- 
ject to the four percent (three percent until July 16, 1991) state tax and any applicable local sales or 
use tax: 

(1) cleaning compounds for janitorial and sanitary purposes; 

(2) uniforms for employees; 

(3) advertising materials; 

(4) office furniture, fixtures and equipment; 

(5) ice boxes, vending machines and pre-mix cylinders for use in vending machines; 

(6) conveyance equipment such as jack lifts and repair parts therefor which are not used in the 
production process; 

(7) paint for cases, trucks, signs, and buildings; 

(8) lubricants, repair parts and accessories for motor vehicles; 

(9) clocks, pencils, knives, etc. used as gifts. 

History Note: Statutory Authority G.S. 105-164.4: 105-164.6; 105-164.13; 105-262; 105-264; 
Eff. Febmary 1, 1976; 
Amended Eff. October I, 1991; May II, 1979; September 30, 1977. 

.0404 ELECTRIC POWTR CO.MPAMES 

(a) Sales of the following items of tangible personal property to firms engaged in generating, 
producing or processing electric power to be distributed to consumers are subject to the one percent 
sales or use tax with a maximum tax of eighty dollars ($80,00) per article: 

(1) all production machinery and accessories thereto; all machinery controls located within a power 
plant or a plant substation; and control gates and control valves located at the dam site for reg- 
ulating flow of water to turbines; 

(2) control panel boards located within the powerhouse and their connecting wiring; 

(3) bus bars conducting electric current from generator to powerhouse substation transformer; 

(4) powerhouse pumping equipment for drainage; 

(5) all pumping equipment for transferring transformer oil from storage tank to powerhouse trans- 
formers, or fuel oil to emergency generator motors; 

(6) electric traveling cranes budt into powerhouse structures for handling turbines, generators and 
transformers in making installations or repairs; 

(7) distribution and power transformers of 1 1/2 KVA and larger; capacitors; induction feeder 
voltage and constant current regulators; de-ion gaps and expulsion type cutouts for transformers; 
relays; oU switches; sectionalizing switches; lightning arresters; arcing horns and gaps; watt-hour 
and panel control meters but not testing or laboratory equipment and meters; Current and 
potential transformers used in metering equipment are also included as machinery and accesso- 
ries. 

(b) Sales of the following items of tangible personal property to electric power companies are subject 
to the four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax: 

(1) materials for the construction, repair or maintenance of powerhouses and powerhouse trans- 
former stations; 

(2) materials for dams, penstocks, and canals; pipes or ducts carrying water to turbines; 

(3) all lines, wiring, poles, bracing, cross-arms, insulators, or any other materials going into or 
constituting a part of a power line structure used for distribution of power or current; 

(4) all storage tanks, including those located in or used in connection with the powerhouse; 

(5) all tools and maintenance equipment used separate and apart from those items classified as 
production machiner>' and equipment. 

(c) The gross receipts derived by a utility from the sale of electricity are subject to th,e three percent 
state rate of sales tax on and after January 1, 1985. The term "utility," as used in this Rule, includes 
an electric power company that is subject to a privilege tax based on gross receipts under G.S. 105-1 16 
or a municipality that sells electric power, other than a municipality whose only wholesale supplier of 



6:13 NORTH CAROLINA REGISTER September 30, 1991 826 



FINAL RULES 



electric power is a federal agency and who is required by a contract with that federal agency to make 
payments in lieu of taxes. The gross receipts upon which the tax is due is the total amount for which 
electricity is sold, including any charges for services that go into the production or delivery of the elec- 
tricity and that are a part of the sale valued in money whether paid in money or otherwise, and includes 
any amount for which credit is given to the purchaser by the seller without any deduction on account 
of the cost of the electricity sold, the cost of materials used, labor or service costs, interest charged, 
losses or any other expenses whatsoever. Therefore, all charges for tangible personal property and 
services, provided in the production and deUvery of electricity to consumer purchasers are a part of the 
gross receipts from the sale of electricity upon which the tax is due notwithstanding that some charges 
may be billed separately to the customers from the charge for the metered ser\'ice. Set forth in this 
Paragraph are the departmental determinations as to the apphcation of tax to specific transactions by 
electric utility companies; 

(1) Electric service meter charges are a part of gross receipts subject to the three percent sales tax. 

(2) The basic service charges to the customer, whether or not the customer uses metered service, 
are a part of the gross receipts from the sale of electricity subject to the three percent sales tax. 

(3) Security deposit interest paid to customers on deposits are not subject to sales tax. 

(4) Conservation discounts on electric service metered charges are exempt from sales tax when such 
discounts reduce the amount for which such service is billed to the customer. 

(5) Senice charges made to customers when the company first supplies electricity under any ap- 
plicable metered rate schedule are a part of gross receipts from sales of electricity subject to the 
three percent sales tax. 

(6) Construction charges to new customers for extending a utihty's facilities to these customers are 
a part of the gross receipts from sales of electricity subject to the three percent sales tax. 

(7) Underground service charges to residential, commercial and industrial customers who are served 
by underground facilities are a part of the gross receipts from sales of electricity subject to the 
three percent sales tax. 

(8) Temporary service charges for installing and removing a service of a temporary nature are a part 
of gross receipts from the sale of electncity subject to the three percent sales tax. 

(9) Ad\'ance payments for temporary service that are collected prior to meter installation and cus- 
tomer account establishment are a part of gross receipts from the sale of electncity subject to the 
three percent sales tax. If the amount charged to the customer is in excess of the amount due 
by the customer for this service it should be refunded to the customer, including the sales tax. 

(10) Charges for providing customers additional facilities to furnish service are a part of gross receipts 
from the sale of electricity subject to the three percent sales tax notwithstanding that facilities 
are requested by the customers. 

(11) Charges for transformers which constitute charges for additional equipment furnished as a part 
of the electric service are subject to the three percent rate of sales tax. 

(12) Charges for transformers under bona fide rental agreements have been and continue to be 
subject to the four percent (three percent until July 16, 1 99 1) state tax arid any applicable local 
sales or use tax and the tax on such rentals should be reported monthly on Sales and Use Tax 
Report Form, E-500. 

(I3j .Vrea lighting charges for area lighting service which is available to customers for the purpose 
of lighting private streets, private driveways and other outdoor areas by the means of mercury 
vapor or sodium vapor units constitute receipts from the sale of electricity subject to the three 
percent sales tax. 

( 14) Residential subdivision street hghtmg charges for services supplied in the lighting of residential 
dedicated pubhc streets by means of mercury vapor and sodium \'apor lighting units are a part 
of gross receipts from sales of electricity subject to the three percent sales tax. 

( 1 51 The amounts actually charged to customers for electricity consumed for the bilhng period are 
the amounts on which the three percent sales tax is due and is to be charged notwithstanding 
that the customers may be under equal pay agreements. 

( 16) Charges for reconnecting service to customers after service has been terminated for nonpa) ment 
are a part of gross receipts from sales of electricity subject to the three percent sales tax. 

(17) Sales of electricity to manufacturing industries and plants, laundries, dry cleaning plants and 
farmers are subject to the three percent sales tax. 

(15) A utility must report receipts from sales of electricity on an accrual basis. Such receipts are to 
be reflected on the Utilities and Municipalities Sales Tax Report, Form E-500E, which is to be 
filed monthly on or before the last day of the month following the calendar month in which the 
tax accrues. 



827 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



(19) Load control discounts on electric service metered charges for residential customers which re- 
duce the amount by which the customer is billed are not a part of the sale of electricity on which 
sales tax is due. 

(20) Charges to customers for supplying information through energy or time pulses are not a part 
of the sale of electricity subject to the three percent sales tax provided the customer already has 
the facilities for electric service in place. 

(21) Demand profile charges or pulse data charges for demand information as requested by a cus- 
tomer are not a part of gross receipts from the sale of electricity subject to the three percent sales 
tax. 

(22) Energy audit amounts charged to customers for a comprehensive energy audit provided by a 
utility are not a part of gross receipts from sales of electricity subject to the three percent sales 
tax. 

(23) Late payment charges billed on a balance that was not paid on the previous month's bill are 
not a part of gross receipts of sales of electricity subject to the three percent sales tax. 

(24) Return check charges for checks received by a utility in payment of an account and returned 
by the bank because of insufficient funds are not a part of gross receipts from the sale of elec- 
tricity subject to the three percent sales tax. 

(25) Home energy loan amounts which represent the amount due under The Help Loan Program 
are not a part of gross receipts from the sale of electricity. 

(26) Loan late payment charges for an amount due under the loan program that is not paid in ac- 
cordance with the loan agreement are not gross receipts from the sale of electricity subject to the 
three percent sales tax. 

(27) Sales of electricity directly to the United States Government or any agency thereof are not 
subject to sales or use tax. In order to be a sale to the United States Government, the govern- 
ment or agency involved must make the purchase of electricity and pay directly to the vendor 
the purchase price of such electricity. While a utility's sales directly to the United States Gov- 
ernment or an agency thereof are exempt from sales tax, a utility should obtain a purchase req- 
uisition from each agency for its records. 

(28) Sales of electricity directly to the North Carolina Department of Transportation or any division 
thereof are not subject to sales or use tax. In order to be a sale to the North Carolina Depart- 
ment of Transportation, the Division involved must make the purchase of electricity and pay 
directly to the vendor the purchase price of such electricity. While a utility's sales directly to the 
North Carolina Department of Transportation or a division thereof are exempt from sales tax, 
a utility should obtain a purchase requisition from each division for its records. 

(29) Sales of electricity to registered electric membership cooperatives and to registered municipalities 
for resale are exempt from sales tax when such sales are supported by properly completed Cer- 
tificates of Resale, Form E-590. Electric membership cooperatives and municipalities selling 
electricity must add and collect the three percent sales tax on their gross receipts from the sale 
of electricity. A municipality that pays the retail sales tax imposed on sales of electricity may 
deduct from the amount of tax payable by the municipality an amount equal to three percent 
of the dilTerence between its gross receipts from sales of electricity for the preceding quarter and 
the amount paid by the municipality for purchased power and related services during that 
quarter. 

(30) Accounts of purchasers representing taxable sales on which the three percent sales tax has been 
paid that are found to be worthless and actually charged off for incomes tax purposes may, at 
corresponding periods, be deducted from gross sales provided, however, they must be added to 
gross sales if afterwards collected. 

(31) Local sales ta.xes are not applicable to those receipts from services subject to the state sales tax 
of three percent, but any applicable local taxes are applicable to receipts from sales and leases 
of tangible personal property subject to the four percent (three percent until July 16, 1991) state 
rate of tax. 

History Note: Statutory Authority G.S. 105-164.3; 105-164.4: 105-164.6: 105-262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991; June I, 1985. 

.0405 MINrSG AND QUARRYING 

(a) Sales of articles of tangible personal property used in direct production or extractive processes 
inside the mine, including dynamite and other explosives, are deemed to be sales of mill machinery or 



6:13 NORTH CAROLINA REGISTER September iO, 1991 828 



FINAL RULES 



miU machinery parts and accessories and are taxable at the rate of one percent subject to a maximum 
tax of eighty dollars (SSO.OO) per article. 

(b) Sales or purchases of items such as caps, hghts, gloves or other devices, regardless of whether paid 
for or owned by employees or employers, first aid equipment and supplies for use in connection with 
the maintenance of a first aid station, and safety supplies, such as dust masks, eye shields, goggles and 
respirators are subject to the four percent (three percent until July 16, 1991) state tax and any applicable 
local sales or use tax. I'ire extinguishers sold to mining and quarrying operators are deemed to be safety 
equipment and are therefore subject to the four percent state tax and any applicable local sales or use 
tax. 

(c) The process of mining shall be considered completed when the extracted product leaves the ex- 
cavation and is ready for transportation elsewhere. Transportation of the extracted product is deemed 
to be part of the manufacturing or processing operation if the manufacturing or processing and the 
mining are performed on the same premises; therefore, locomotives, or other power units, and cars or 
conveyors which are pulled by these power units from the excavation to processing plants on such 
premises are deemed to be mill machiner>'. Tracks for cars and power units, and power lines either 
inside or outside the excavation, are deemed to be structures and sales of materials used in constructing 
the same are subject to the four percent (three percent until July 16, 1991) state tax and any applicable 
local sales or use tax. 

(d) Quarries, in the generally accepted sense of the term, regularly operated for the production of 
stone, sand, clay, marble, granite, gravel, crushed stone, and similar products for commercial purposes 
are deemed to be manufacturing plants and industries, and sales to such manufacturing plants and in- 
dustries of production machinery, and parts and accessories thereto, are subject to the one percent sales 
or use tax with a maximum tax of eighty dollars ($80.00) per article. Power shovels, driUs and similar 
equipment sold for use in mines or quarries in the extractive processes are classified as production 
machinery. However, if such equipment is not used in the mine or the production processes, it does 
not qualify as production equipment and is subject to the four percent (three percent until July 16, 
1991) stale tax and any applicable local sales or use tax. 

History' Note: Statutory Authority G.S. 105-164.4; 105-164.6: 105-262; 
Eff. February I. 1976; 
Amended Eff. October I. 1991. 

.0406 OTHER MILLS AND PROCESSORS 

Sales of production machinery, and parts and accessories thereto, to sawmills, lumber nulls, miUwork 
plants, flour mills, grist mills, feed mills, fish canneries, fertilizer plants, cotton gins, food canneries, 
photo finishers, printers, ready-mixed concrete plants and asphalt plants (but not concrete or asphalt 
contractors), poultry processors, wood preserving plants, brick manufacturers, cement, cinder and 
clinker block manufacturers, paper mills, tanneries, pottcr>' makers, novelty manufacturers, and any 
other producer for use in the production process, as the term "production" is defined in 17 NC^AC 7B 
.0202(a) (1), to fabricate, process or manufacture articles of tangible personal property for sale are 
subject to a one percent rate of tax with a maximum tax of eighty dollars ($80.00) per article. 

Note: (1) Bulldozers or other equipment sold to sawmill operators for the purpose of 
opening or maintaining entries to timber lands arc not miU machinery' and such sales are 
subject to the four percent (three percent until July 16, 1991) state tax and any applicable 
local sales or use tax. 

Note: (2) Wedges, cant hooks, log binders, log jacks and log chains sold to sawmill and 
lumber mill operators for use in cutting timber arc classified as mill machiner>' or parts and 
accessories for such machinery, and such sales are subject to the one percent sales or use 
tax. 

Note: (3) Sales to wood products manufacturers or producers and their contractors or 
subcontractors of log-skidders, log-carts, tree-shears, feller-bunchers, grapple skidders, 
winches, chainsaws, clippers, tractors, axes and mallets for use in cutting and transporting 
timber on lands owned by them or on lands where timber rights have been acquired for 
timber to be manufactured into wood products or for sale either directly or indirectly to 
wood products manufacturers are classified as mill machinery and subject to the one percent 
rate of tax with a maximum tax of eighty dolkirs ($80.00) per article. Sales of such ma- 
chiner>- or equipment to employees of wood products manufacturers or producers are sub- 



829 6:U NORTH CAROLINA REGLSFER September 30, 1 99 1 



FINAL RULES 



ject to the four percent (three percent untU July 16, 1991) state tax and any applicable local 
rates of tax. 

Note: (4) Dynamite sold to fertilizer manufacturers for use in blasting mounds of fertilizer 
which has been stored for aging processes is not classified as miU machinery or accessories 
thereto, and such sales are subject to the four percent (three percent until July 16, 1991) 
state tax and any applicable local sales or use tax. 

Note: (5) Propylene glycol sold to poultry processors for use as a refrigerant in the man- 
ufacturing process is classified as an accessory to rrull machinery and such sales are subject 
to the one percent sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-164.13; 105-262; 
Eff. February 1, 1976; 
Amended Eff. October 1, 1991; August 1, 1988; June I, 1984; February 8, 1981. 

.0407 DAIRIES AND CREAMERIES 

(a) Sales to dairies, creameries and like businesses of the following items of tangible personal property 
are taxable at the rate of one percent subject to a maximum tax of eighty dollars ($80.00) per article: 

(1) Babcock testers electrically operated; 

(2) BoUers producing steam to be used in manufacturing or processing, together with fire boxes, 
grates, fire brick, gauges, steam pipes, and other necessary accessories to such boilers; 

(3) Bottle cappers; 

(4) Brine pumps; 

(5) Butter molds; 

(6) Butter chums and workers; 

(7) Butter cutters, packers and printers; 

(8) Cans for handling rrulk during processing or manufacturing; 

(9) Can steamers; 

(10) Circulating bar makers; 

(11) Chocolate bar makers; 

(12) Conveyors and conveyor chains; 

(13) Cooling machines and their fittings and attachments; cottage cheese vats for manufacturing but 
not storage; 

(14) Cream separators; 

(15) Cream savers, vats and hose; 

(16) Curd agitators and attachments; 

(17) Dr\' ice saws; 

(IB) Electric fdlers, cappers and attachments; 

(19) Filling machines and attachments; 

(20) Filters and filter cartridges; 

(21) Heat exchanges; 

(22) Heaters and sterilizing machines; 

(23) Homogenizers; 

(24) Ice cream freezers; 

(25) Ice cream hardening cases; 

(26) Ice cream molds and pans; 

(27) Jalco testers; 

(28) Jug fiUers and cappers mechanically operated; 

(29) Machines and cleaning compounds for washing and sterilizing bottles, cans and other contain- 
ers; cleaning compounds for cleaning production machinen,'; 

(30) Pasteurizers and attachments; 

(31) Pipe line filters; 

(32) Pipe and fittings for use on, or attached to, machinery; 

(33) Purity brine units; 

(34) Rapid flow frigid filters; 

(35) Receiving tanks and units; 

(36) Rinsers and sterilizers; 

(37) Roller conveyors; 

(38) Scales when attached to a machine; 

(39) Specialty brass filters and cappers, but not hand operated; 



6:13 NORTH CAROLINA REGISTER September 30, 1991 S30 



FINAL RULES 



(40) Storage tanks and vats for milk, ice cream, and other milk products; 

(41 ) Thermometers, charts and gauges when attached to any part of a machine; 

(42) \'ork freezers, and all other machinery', special tools therefor, attachments and accessories used 
in the manufacture or processing of milk and nulk products whether or not specifically enu- 
merated above; aU repair and replacement parts for machinery, attachments and accessories, and 
all engines, motors, pulless, motor bases but not foundations, gears, belts, line shafting with 
hangers and pulleys and other t\pes and makes of drives connecting motors to the driven ma- 
chinery, and all repair and renewal parts of the same. 

(b) Sales of the following items of tangible personal property to dairies, creameries, and like businesses 
processing and manufacturing dairy products are exempt from the tax if such materials are purchased 
for use in packaging, shipment or delivery of tangible personal property which is sold either at wholesale 
or retail and such articles constitute a part of the sale of such tangible personal property and are deliv- 
ered with it to the customer: 

( 1) butter boxes and cartons; 

(2) cheese cartons; 

(3) glass and other containers; 

(4) ice cream cups and mUk bottle crates; 

(5) ice cream spoons, wood and fiber labels; 

(6) milk bottles, and jugs of all sizes and materials; 

(7) milk bottle caps and hoods of all makes; 

(8) sealing tape; 

(9) twine; 

(10) straws; 

(11) wrappers, wrapping paper and other tangible personal property used, consumed or furnished 
free in the packing, sale or distnbution of rrulk and rrulk products. 

(c) Sales to dairies, creameries and Uke businesses of freezing or cooling units not classified as proc- 
essing machinery or accessories are subject to the four percent (three percent until July 16, 1991) state 
tax and any apphcable local sales or use tax. Freezing or cooling units in which finished dairy products 
are stored pending distribution or dispensation to wholesale or retail customers do not qualify as 
processing machinery or accessories. 

History Xote: Statutorv Authoritv G.S. 1 05- 1 64. 4: 105-164.6: 105-164.13; 105-262; 
Eff. February I. 1976; 
Amended Eff. October 1. 1991; May 11, 1979. 

SECTION .0500 - EXEMPT SALES TO MANUEACTl RERS 



.0502 PACKAGEVG MATERL\LS 

(a) Sales of bagging and ties or other packaging materials to manufacturers for use in processing their 
customers' feed are exempt from tax provided their customers will resell the feed and such packaging 
materials are a part of the sale. If the manufacturers use bagging and ties or other packaging materials 
in processing their customers' feed, which the customers will use and not resell, such bagging and ties 
and other packaging materials are subject to the four percent (three percent until July 16, 1991) state 
tax and any applicable local sales or use tax. 

(b) Box wraps, labels, printed toppers for polyethelene bags and cardboard hosier*' inserts upon which 
hosiery is placed are exempt from tax when sold to hosiery manufacturers and such items attach to, 
contain, or otherwise become a part of the sale of the hosiery. 

(c) Sales of scotch tape, sealing paper and steel strapping to manufacturers, producers, and retailers 
for use as set forth under the provisions of G.S. 105-164.13(23) are exempt from the tax. 

(d) Sales of drums to manufacturers, producers, wholesalers, and retailers are exempt from tax under 
G.S. 105-164.13(23) when such drums are used for packaging, shipment, or delivery of tangible personal 
property which is sold at wholesale or retail and when such drums constitute a part of the sale of such 
tangible personal property and are deli\'ered with it to the customer. Sales of paint to manufacturers, 
producers, wholesalers, and retailers for use in painting such drums are also exempt from tax. 

(e) Sales to manufacturers, producers, wholesalers and retailers of instruction sheets, instruction 
booklets or pamphlets, direction folders and similar items which constitute a part of the sale of tangible 
personal property at wholesale or retail and are delivered with it to the customer to gi\'e instructions 
as to the proper use of such property are not subject to sales or use tax. Provided, however, that this 



831 6:13 NORTH CAROLINA REGISTER September 30, 1 99 1 



FINAL RULES 



ruling shall not apply to sales of any items of tangible personal property which accompany products 
being sold to advertise other products and do not give instructions as to the proper use of the products 
being purchased. 

(f) Sales to manufacturers of strapping, bagging, ties, and other packaging materials for use in the 
production line to package or hold materials which are not for sale but which are held for further 
processing in the same plant or at another plant are classified as accessories to the production process 
and, thus, are taxable at the rate of one percent. The one percent rate of tax is also applicable to sales 
of packaging materials to manufacturers to be used to package materials or hold materials in process 
which are transferred to a contract manufacturer for further processing even though such materials are 
not sold to the contract manufacturer by the owner thereof. 

(g) Packaging materials which are purchased by a contract manufacturer and used to package pro- 
ducts which it is manufacturing or processing for its manufacturer-customers to be sold by such 
manufacturer-customers in such packages or containers, are not subject to the tax since the packaging 
materials will become a part of the sale of the products by the owner thereof. If such packaging ma- 
terials are used by the contract manufacturer to package or hold products which are returned to the 
manufacturer-customers or sent to other contract manufacturers for further processing, they would be 
subject to the one percent rate of tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-164.13; 105-262; 
Eff. February 1, 1976; 
Amended Eff. October 1, 1991. 

SECTION .0600 - SALES OF .MILL .MACHINERY AND ACCESSORIES 



.0602 PACKAGCSG MACHINERY 

Sales of packaging machiner>' to manufacturers to be used to package their manufactured product 
during the initial stage and through the fmal steps of production are subject to the one percent rate of 
tax with a maximum tax of eighty dollars ($80.00) per article. Machinery and equipment used in the 
shipping room, warehouse or other locations separate and apart from the manufacturing process to 
prepare property for shipment is subject to the four percent (three percent until July 16, 1991) state tax 
and any applicable local sales or use tax. 

Histofy Xote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.0603 TAPE DISPENSING MACHINES 

Sales of tape dispensing machines to manufacturers and other industrial processors for use in packag- 
ing their manufactured products in the line of process as a part of the manufacturing operations are 
subject to the one percent rate of tax. Sales of tape dispensing machines to manufacturers for use in 
shipping rooms are subject to the four percent (three percent until July 16, 1991) state tax and any 
applicable local sales or use tax. 

History Note; Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1, 1976; 
Amended Eff October 1. 1991; July 5, 1980. 

.0604 STRAPPING MACHESE 

The sale of a strapping machine to a manufacturer for use in packaging products during the manu- 
facturing process is subject to the one percent rate of tax, with a maximum tax of eighty dollars ($80.00) 
per article. The sale of a strapping machine to a manufacturer for use in a distribution or fmished goods 
storage area is subject to the four percent (three percent until July 16, 1991) state tax and any applicable 
local sales or use tax. 

Histoiy Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 



6:13 NORTH CAROLINA REGISTER September 30, 1991 S3 2 



FINAL RULES 



.0610 WATER Fl RIFICATION EQUIPMENT AND CHEMICALS 

Sales to manufacturers of machiner,' for use in the purification of water for use in the manufacturing 
process are subject to the one percent rate of tax with a ma.ximum tax of eighty dollars ($80.00) per 
article applicable thereto. Sales to such manufacturers of pumps and pipe to be used to pump the water 
from the river or other source to the purification plant are subject to the four percent (three percent 
until Jul\' 16, 1991) state tax and any applicable local sales or use tax. Sales of chemicals to manufac- 
turing industries and plants to purify and clarify water to be used for manufacturing purposes are sub- 
ject to the one percent rate of tax. 

Histon- Sote: Statutor\- Authohiv G.S. 105-164.4: 105-164.6: 105-262; 
Eff. February I, 19^6: 
Amended Eff. October 1. 1991. 

.0615 INSULA HON M.VIERIALS: MANUFACTURERS 

Insulation materials sold to manufacturing industnes or plants for use by them in repairing or main- 
taining machinery- or equipment which is properly classified as mill machinen,' or accessories thereto 
are taxable at the one percent rate of tax. Insulation materials used in repairing or maintaining 
buildings or machincp," and equipment w luch is not properly classified as mill machiner\' or accessories 
are subject to the four percent (three percent until July 16. 1991) state tax and any applicable local sales 
or use tax. 

Hisioiy Sote: Statutorv Authority G.S. 105-164.4: 105-164.6: 105-262; 
Eff. Feb'ruan- 1. 19" 6; 
.Amended Eff. October 1. 1991. 

.0617 Lin TRUCKS 

Sales of lift trucks to manufacturing industries and plants for use in mo\'Lng materials between the 
beginning and ending step in the manufacturing process are considered to be mill machiner>' and are 
taxable at one percent of the sales price with a maximum tax of eighty dollars ($80.00) per article. Lift 
trucks which are for use in recei\Lng and shipping areas are subject to the four percent (three percent 
until Jul}" 16. 1991) state tax and any applicable local sales or use tax, and no ma.ximum tax is appli- 
cable thereto. 

Histon Sote: Statutory Authority G.S. 105-164.4; 105-164.6: 105-262; 
Eff. February 1. 19^6; 
Amended Eff October I. 1991. 

.0618 SINGLE ARTICLE APPLICATION: SYSTEM 

(a) .\n operating system containing a number of separate articles of equipment does not constitute 
a single article as contemplated by the statute. Each single article within the system is subject to the 
one percent rate of tax w ith a maximum tax of eighty dollars ($80.00) per article applicable to each 
single article. 

(b) A manufacturer or processor which purchases various components of mill machiner.' or equip- 
ment, otherwise taxable at the rate of one percent, is not purchasing a single article of mill machiner.', 
as such, e%en though the assembled machinery or equipment constitutes a single article. The purchaser 
has made numerous purchases of components of machiner.- or equipment and the tax is due on each 
purchase at the rate of one percent, and if the cost of any one component docs, in fact, exceed eight 
thousand dollars ($8,000.00). the eighty dollars ($80.00) maximum tax would be applicable thereto. 
If any one article, as such, is purchased by a taxpayer, it does not lose its identity as a single article 
because it is too large or cumbersome to be shipped as "the", single article and has to be disassembled 
for shipping purposes or is billed on more than one invoice. The single article limitation has never been 
interpreted to apply to numerous purchases from the same or different vendors, even though the various 
components so purchased may be assembled by the purchaser into a single article. Ihe purchase of a 
quantity of repair parts necessap,- to recondition or upgrade miU machinen.- is not considered a single 
article. 

Histon Sote: Statuton Authority G.S. 105-164.4: 105-164.6: 105-262; 
Eff Februan 1, 19~6: 
Amended EJf October 1. 1991. 



833 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



.0621 ELECTRIC LIGHT BULBS 

Electric light bulbs which attach to items properly classified as mill machinery are classified as acces- 
sories to such machinery and are taxable at the rate of one percent of the sales price. Such bulbs for 
electric fixtures which attach to buildings or structures to provide general lighting for the buildings or 
structures are subject to the four percent (three percent until July 16, 1991) state tax and any applicable 
local sales or use tax. 

History Note: Statutory Authority G.S. I05-I64.4; I05-I64.6; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991. 

.0624 ELEVATORS 

Sales of elevators to manufacturers which become a part of the building or structure are subject to the 
four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.0626 PAPER STOCK 

Purchases of paper stock by a manufacturer for use in printing its own stationery, office forms, ac- 
counting forms, stock or production control records or similar items for use are subject to the four 
percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.0627 HANG TAGS AND LABELS 

Sales of hang tags to manufacturers which are placed on their manufactured product to advertise other 
products they manufacture are subject to the four percent (three percent until July 16, 1991) state tax 
and any applicable local sales or use tax. Tags or labels that describe the product to which they are 
attached and which become a part of the sale are exempt from tax. 

History Note: Statutory Authoritv G.S. 105-164.4; 105-164.6; 105-164.13; 105-262; 
Eff Feb-uary 1, 1976; 
Amended Eff October 1, 1991. 

.0628 STOCK CONTROL CARDS 

Stock control cards sold to users or consumers are subject to the four percent (three percent until-July 
16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.0629 OEEICE SUPPLIES: STENCILS 

Sales of stencils, office supplies, and other tangible personal property to manufacturing industries and 
plants for use in receiving or shipping areas and other raw materials or fmished goods storage areas are 
subject to the four percent (three percent until July 16, 1991) state tax and any applicable local sales 
or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February' 1, 1976; 
Amended Eff October 1, 1991; July 1, 1984. 

.0630 SCALES 



6:li NORTH CAROLINA REGISTER September 30, I99I 834 



FINAL RULES 



Scales used to weigh truck loads of peanuts as they are brought to peanut manufacturing or processing 
plants from the markets are subject to the four percent (three percent until July 16, 1991) state tax and 
any applicable local sales or use tax. 

Ilistorv Xote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
I'.ff. February 1, 1976; 
Amended Eff. October 1, 1991. 

.0631 SEWACiK I REATMENT PLANTS 

Sewage treatment plants are not manufacturers under the Sales and Use Tax Law and sales of chem- 
icals, machinery and equipment for use in their operation are subject to the four percent (three percent 
until July 16, 1991) state tax and any applicable local sales or use tax. 

llistoty Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. Febnmrv 1, 1976; 
Amended Eff. October 1, 1991. 

.0632 (;rain elevalors 

Gram and peanut elevator operators are not manufacturers or processors within the meaning of the 
Sales and Use Tax Law. Purchases of taxable tangible personal property by such fums for use or 
consumption in the operation of their business are subject to the four percent (three percent until July 
16, 199L) state tax and any appUcable local sales or use tax. 

Ui!>tory Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.0633 AM>L\LS AND ANLNEAL CAGES 

Sales of animals and animal cages to research laboratories for use in performing research services for 
others and for use in performing research for the purpose of selling the fmdings and results to others 
are subject to the four percent (three percent until July 16, 1991) state tax and any applicable local sales 
or use tax. Sales of animals and animal cages to manufacturers for use in experimentation and research 
purposes for the improvement of its manufactured products or for the development of products which 
it will manufacture are subject to the one percent rate of tax with a ma.ximum tax of eighty doUars 
($80.00) per article. Sales of animal cages to manufacturers for use to contain ;mimals in holding areas 
or storage areas are subject to the four percent state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1 , 1976; 
Amended Eff October 1, 1991: July 5. 19S0. 

SECTION .0700 - SPECIEIC INDUSTRY PURCHASES 



.0702 EURNITURE FACTORIES 

(a) The one percent rate of tax applies to sales of paper tape to furniture and plywood manufacturers 
which apply the tape to products manufactured for sale and subsequently remove the tape from the 
manufactured products during the sanding and finishing process. Paper tape, sold to \'eneer or plywood 
manufacturers that apply it to the manufactured products and do not remove it from the veneer or 
plpvood panels before they are sold, is a component part of the finished product and is exempt from 
tax. 

(b) Sales of lumber stackers to manufacturers for use in moving tangible personal property before the 
manufacturing process begins and after the manufacturing process has been completed are subject to 
the four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

(c) Paper or plastic which is sold as Uner stock for use in lining paint spraying booths and chambers 
used in the manufacture of furniture is subject to the one percent rate of tax. 

(d) Sales of rags to furniture manufacturers to buff or polish furniture being manufactured for sale 
are taxable at the rate of one percent. The total charge to manufacturing industries and plants for the 



835 6:15 NORTH CAROLINA REGISTER September iO, 1991 



FINAL RULES 



laundering of such rags or similar finishing materials for such use is subject to the four percent (three 
percent until July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. I05-I64.4; 105-164.6; 105-164.13; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991. 

.0704 MrsTsG AND QUARRYING 

(a) Machinery and piping used in the flotation process in mining operations are taxable at the rate 
of one percent with a maximum tax of eighty doUars ($80.00) per article. Chemicals used during the 
flotation process are exempt from the tax. 

(b) Mucking machines, pumps and pipe used to remove water and muck from the mine are subject 
to the four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

(c) Sales of front-end loaders and repair parts therefor to commercial quarry and mine operators for 
use in the direct extractive processes are taxable at the rate of one percent with a maximum tax of eighty 
doUars ($80.00) per article. Sales of front-end loaders and repair parts therefor to quarry and mine 
operators for use in transporting the extracted product from the mine or quarry to the initial step in the 
process on the same premises as the mine are taxable at the rate of one percent with a ma.ximum tax 
of eighty dollars ($80.00) per article. Sales of front-end loaders and repair parts therefor to quarry and 
mine operators for use in the receiving and distribution areas are subject to the four percent (three 
percent until July 16, 1991) state tax and any applicable local sales or use tax and no ma.ximum tax is 
applicable thereto. 

(d) Pipe used to ventilate a mine is subject to the four percent (three percent until July 16, 1991) state 
tax and any applicable local sales or use tax. 

(e) Sales to mine operators of bulldozers to be used to remove overburden and for general purposes 
are subject to the four percent (three percent untiJ July 16, 1991) state tax and any applicable local sales 
or use tax. The sale of a bulldozer to a mine operator only for use in the extraction processes in strip 
mining and the removal of overburden from the products to be mined is taxable at the one percent rate 
of tax. 

(f) Sales of irrigation pipe to quarries for use in the manufacturing process to wash stone which they 
produce for sale are taxable at the rate of one percent. 

History Note: Statutory Authority G.S. 105-164.4: 105-164.6; 105-164.13; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991; July 5, 1980. 

.0705 TEXTILE MILLS 

(a) Sales of special gloves to hosier)' manufacturers for use by employees such as knitters and exam- 
iners to prevent picks and pulls on manufactured products are for the protection of the products and 
not for the protection of the employees and are taxable at the one percent rate. 

(b) Box wraps, labels, printed toppers for polyethelene bags and cardboard hosiery inserts upon which 
hosier)' is placed are exempt from tax when sold to hosier)' manufacturers and such items attach to, 
contain, or otherwise become a part of the sale of the hosiery. 

(c) Sales of filter paper to textile manufacturers for use in filtering dye solution are subject to the one 
percent rate of tax. 

(d) Sales of color charts to manufacturers for use in quality control or in preparing new color shades 
for the dyeing process for their manufactured products are taxable at the one percent rate of tax. 

(e) Sales of dye nets to manufacturers for use by them in the dyeing process are classified as acces- 
sories to the manufacturing process and are taxable at the rate of one percent. 

(f) Sales of folding machines to textile manufacturers for use in folding manufactured products in the 
line of process are taxable at the rate of one percent with a maximum tax of eighty dollars ($80.00) per 
article. 

(g) Sales of oil to manufacturers for use in conditioning nylon yam are exempt from sales tax since 
the oil enters into and becomes an ingredient or component part of the manufactured product. 

(h) Receipts from the lease or rental of button attaching equipment and other mill machinery to 
apparel manufacturers are subject to the one percent rate of tax. 

(i) WTien a person engaged in the business of ginning cotton for others purchases a gin stand and 
feeder for use in the ginning process, the purchase would be taxable at the rate of one percent of the 
purchase price with a ma.ximum tax of eigiity dollars ($80.00) on each machine. 



6:15 NORTH CAROLINA REGISTER September 50, 1991 856 



FINAL RULES 



(']) Sales to manufacturers of fabric conditioners and other chemicals which actually enter into man- 
ufactured products at some step between the initial and fmal steps in the manufacturing process are 
exempt from tax. 

(k) Sales of cotton knit tubing to manufacturing industries for use in the manufacturing process, in- 
cluding the dyeing process, are exempt from tax when such items become a part of the sale of the 
manufactured product and are dehvered with it to the customers. Sales to manufacturers of cotton knit 
tubing \\ hich is used in the manufacturing process but which does not become a part of the sale of the 
manufactured product and is not deli%'ered with it to the customer are subject to the one percent rate 
of tax. 

(1) Hosiery inventory control and reorder cards are subject to the four percent (three percent until July 
16, 1991) state tax and any applicable local sales or use tax when sold to hosiery manufacturers. 

(m) Sales to manufacturers of loom cleaners which remove lint from raw materials during the pro- 
duction process to prevent it from becoming entangled in the machine are subject to the one percent 
rate of tax with a ma.ximum tax of eighty dollars ($80.00) per article. Sales of air draft cleaners to 
manufacturers for general cleaning purposes are subject to the four percent (three percent until July 16, 
1991) state tax and any applicable local sales or use tax. 

Hisioiy Sole: Siaiutory Auihoritv G.S. / 05- J 64. 4; 105- 164.6; 105-164.13; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991; July 5, 1980. 

.0706 S.AWMILLS 

(a) Sawmill operators who manufacture lumber for sale qualify as manufacturers for sales and use tax 
purposes. Sales to them of tractors to be used in snaking logs which they have cut from the woods to 
the sawmill or from the woods to points where they can be loaded m trucks or other vehicles for 
transportation to the sawmills are subject to the one percent rate of tax. The one percent rate of tax 
is also applicable to sales of tractors to such purchasers for use in transportmg logs from the stockpile 
to the mill on the same premises. The four percent (three percent until July 16, 1991) state tax and 
any applicable local sales or use tax apphes to sales of tractors to such purchasers for use only in un- 
loading raw materials or in handling lumber in fmished goods inventor,' or in the distribution or ship- 
ping areas. 

(b) Sales of lumber stackers to manufacturers for use in moving tangible personal property before the 
manufacturing process begins and after the manufacturing process has been completed are subject to 
the four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

(c) Sawmills and power units therefor sold to sawmill operators and lumber manufacturers for use 
in the manufacture of lumber for sale are subject to the one percent rate of tax with a maximum tax 
of eighty dollars ($80.00) per article. 

(d) Saw bits and other repair parts for production machinery sold to sawmill operators for use in the 
manufacture of lumber for sale are subject to the one percent rate of tax. 

(e) Sales of chemicals to lumber manufacturers to be applied to lumber at the end of the sawing op- 
eration to keep the lumber from molding are exempt from tax. 

History .Xote: Statutor}' Authoritv G.S. 105-164.4; 105-164.6; 105-164.13; 105-262; 
Eff Februan' I. 1976; 
Amended Eff October 1. 1991. 

.0707 CONCRETE M.ANLFACTl RERS 

(a) Weigh hoppers sold to ready-mix concrete manufacturers and sales of scales to other manufac- 
turers are subject to the one percent rate of tax with a maximum tax of eighty dollars ($80.00) per article 
when used for weighing cement or ingredient materials for the manufacturing process. Sales to man- 
ufacturers of scales for use in shipping and receiving areas are subject to the four percent (three percent 
until July 16, 1991) state tax and any applicable local sales or use tax. 

(b) Effective October 1, 1989, the sale of a truck with a ready-mix concrete rrdll mounted upon the 
chassis at the time of the sale which is operated off a power train from the truck transmission is exempt 
from sales tax and subject to the three percent highway use tax with a maximum tax of one thousand 
dollars ($1,000.00) applicable thereto when sold to a ready-mix concrete manufacturer for use in mixing 
concrete for sale and transporting it to the purchaser. Prior to October 1, 1989, such a sale was subject 
to the two percent rate of tax with a maximum tax of three hundred dollars ($300.00) when sold to a 
ready-mix concrete manufacturer for the above-described purposes. 



837 6:13 NORTH CAROLLVA REGISTER September 30, I99I 



FINAL RULES 



(c) Sales of calcium chloride to concrete manufacturers for use as an ingredient or component part 
of concrete manufactured for sale are exempt from tax. Sales of calcium chloride to contractors for 
use or consumption in the performance of contracts are subject to the four percent (three percent until 
July 16, 1991) state tax and any applicable local sales or use tax. Effective February 15, 1984, sales of 
calcium chloride solutions to farmers for use as an antifreeze in tractor tires are subject to the one 
percent rate of tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-164.13; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991; October 1, 1990; July 1. 1984; January 1, 1982. 

.0708 ICE MANUFACTURERS 

Sales of ice manufacturing machines to persons engaged in the business of manufacturing and selling 
ice at retail or wholesale are subject to the one percent rate of tax with a maximum tax of eighty dollars 
($80.00) per article. Sales of ice machines to grocery stores, restaurants and motels for use in making 
ice are subject to the four percent (tliree percent until July 16, 1991) state tax and any applicable local 
sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1, 1976; 
Amended Eff October 1, 1991; July 5, 1980. 

.0710 FOOD PROCESSORS 

(a) Sales of caustic soda to food processors for use in peeling fruits and vegetables, such as apples and 
potatoes, are subject to the one percent rate of tax when the caustic soda does not enter into the 
product being processed or does not become an ingredient or component part of the product being 
processed. 

(b) Sales to meat processors of ammonia and other refrigerants for use in refrigeration machinery 
which is used to condition meat for processing are subject to the one percent rate of tax. 

(c) Sales of insecticide to flour and feed manufacturers for use in the control of grain weevils in grain 
storage areas are subject to the four percent (three percent until July 16, 1991) state tax and any ap- 
plicable local sales or use tax. 

(d) Sales of rubber fmgers to poultr\' processing plants for use m plucking feathers from poultry 
during the production process are subject to the one percent rate of sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.0711 MODULAR HOME M.\\UF.\CTURERS 

(a) When a modular home manufacturer enters into a sales contract to manufacture and sell a mod- 
ular home to a contractor or other user or consumer, he is making a retail sale of a manufactured item 
ot tangible personal property and is liable for collecting and remitting the four percent (three percent 
until July 16, 1991) state tax and any applicable local sales or use tax on the total retail sales price 
thereof including all charges for fabrication labor performed and services rendered that go into the 
manufacture and delivery of the modular home. A modular home manufacturer who is engaged in the 
business of manufacturing homes for sale to contractors or other users is liable for remitting the one 
percent rate of tax on purchases of tools and machinery for use during the production processes with 
a maximum tax of eighty doUars ($80.00) per article applicable thereto. 

(b) WTien a modular home manufacturer purchases land and enters into a contract to seU his cus- 
tomer a lot with a house built thereon, or enters into a turn key contract to furnish labor and materials 
to build a home on the customer's lot, manufactures the house after the contract is executed, and 
transports it to the lot for erection and finishing, the manufacturer is liable for payment of the four 
percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax on the 
materials which he uses in fulfilling the contract. The basis for the tax is the cost price of such mate- 
rials, and the fact that sections of the house are fabricated in the plant and transported to the job site 
does not affect the basis for the tax. A modular home manufacturer who engages primarily in the 
business of manufacturing homes which he uses in the performance of contracts to furnish and erect 
homes is liable for remitting the four percent (three percent until July 16, 1991) state tax and any ap- 



6:13 NORTH CAROLINA REGISTER September 30, 1991 S38 



FINAL RULES 



plicable local sales or use tax on purchases of tools, machiner,' and other tangible personal property for 
use in the manufacture and erection of such homes. 

History Sole: Slatutory Auihoritv G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1, 1976; 
Amended Eff. October 1. 1991. 

.0712 MONUMENT MANLFACTLRERS 

Sales to monument manufacturers of stencils, abrasives and cutting tools and equipment used by such 
manufacturers in the cutting, shaping, and poUshing process and the solvents used to remove the sten- 
cils from the monuments are subject to the one percent rate of tax. Monument dealers who do not 
cut. shape, poUsh and otherwise process monuments are not classified as manufacturers and sales of 
stencils and other supplies to monument dealers for use in lettering or polishing monuments which they 
sell are subject to the four percent (three percent until July 16, 1991) state tax and any applicable local 
sales or use tax. 

Histofj Sote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1. 1991. 

.0713 ELECTROPLATING INDUSTRIES 

(a) Receipts derived from electroplating tangible personal property belonging to users or consumers 
are not subject to sales or use tax. However, such persons are liable for remitting the four percent 
(three percent until July 16, 1991) state tax and any applicable local sales or use tax on all metal and 
other tangible personal property purchased for use in the operation of their businesses. 

(b) Receipts derived from electroplating tangible personal property for persons who will sell same at 
retail or wholesale are not subject to sales or use tax. Persons doing this type of electroplating are 
classified as manufacturers and their purchases of metal and other tangible personal property which 
enters into or becomes an ingredient or component part of property being electroplated for sale are 
exempt from tax under the provisions of G.S. 105-164.13(8). Purchases by such persons of items which 
are properly classified as mill machinep,' or mill machinery parts and accessories are subject to the one 
percent rate of tax with a ma.ximum tax of eiahtv doUars ($80.00) per article as set forth bv G.S. 
105-164.4(l)h. 

History Sote: Statutory Authority G.S. 105- 164 A; 105-164.6; 105-164.13; 105-262; 
Eff February 1, 1976; 
Amended Eff October I, 1991. 

.0714 REFRACTORY .M.\NUFACTURERS 

WTien refractor," manufacturers enter into contracts to fabricate, furnish and install or apply the nec- 
essary refractor}.' materials for the repair of boilers operated by other manufacturers for power gener- 
ation or supplementary thereto for use in connection with their production processes, as the term 
"production" is defmed in 17 NCAC 7B .0202(a)(1), the tax is due at the state rate of four percent 
(three percent until July 16, 1991) state tax and any applicable local rate of tax of the cost price of the 
refractor)' materials used or consumed in the performance of such contracts, except that, effective July 
1, 1977, the tax is due at the rate of one percent of the cost price of the refractory matenals used or 
consumed by contractors and subcontractors in the pertormance of such contracts. 

Histoiy Sote: Statutory .Authority G.S. 105-164A; 105-164.6; 105-262; 105-264; 
Eff May 11. 19''9: February 1, 19'76; 
Amended Eff October 1, 1991; September 30, 1977. 

.0716 STATE AGENCIES 

(a) The prmting plant, metal plant, soap plant, dupUcating plant, forestn,' unit, woodworking plant, 
and the sign plant of the Prison Enterprises Division of the North CaroUna Department of Corrections 
engage in the business of manufacturing tangible personal property for sale and are classitied as man- 
ufacturers for sales and use tax purposes. Their purchases and sales are subject to the tax in accordance 
with the provisions of 17 NC.AC 7B .0200 and the applicable provisions of the statute. 



839 6:13 NORTH CAROLLSA REGISTER September 30, 1991 



FINAL RULES 



(b) Effective August 1, 1991, the sales tax exemption for prison concession stands was repealed. Such 
sales are subject to the four percent state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; I05-I64.6; 105-164.13; 105-262; 
Eff. February 1, 1976; 
Amended Eff. October 1, 1991; March 1, 1984; January I, 1982; July 5, 1980. 

SECTION .0800 - ADJUSTMENTS: REPLACEMENTS: ALTERATIONS AND 

INSTALLATION SALES 



.0801 ADJUSTMENTS AND REPLACEMENTS 

(a) Whenever any taxable article is returned to the manufacturer for adjustment, replacement, or ex- 
change under a guaranty as to its quality or service and pursuant thereto a new article is given free, or 
at a reduced price, the sales or use tax shall be computed on the actual amount, if any, paid to the 
manufacturer for the new article. 

(b) Dealers using tangible personal property to fulfill sales warranties or guaranty obhgations to a 
customer without cost to the customer shall be liable for and pay the four percent (three percent until 
July 16, 1991) state tax and any applicable local sales or use tax on the dealer's cost price of all tangible 
personal property so used. In such cases, the dealer is using the property and the four percent (three 
percent until July 16, 1991) state rate of tax and any applicable local sales or use tax accrues on the 
dealer's cost price of the property when it is withdrawn from inventory by the dealer. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1. 1976; 
Amended Eff October 1, 1991. 

.0803 CABINET.MAKERS 

(a) Cabinetmakers who fabricate and sell cabinets to homeowners, contractors and others for use in 
this state are liable for collecting and remitting the four percent (three percent untU July 16, 1991) state 
tax and any applicable local sales or use tax on the sales price of such property, including charges for 
any services that go into the fabrication, manufacture or delivery of such tangible personal property 
without any deduction therefrom on account of the cost of the property sold, the cost of materials used, 
labor or service costs, mtei"est charged, losses or any other expenses whatsoever. Any cost of labor or 
services rendered in mstaUmg or afTixing such property when separately stated on sales invoices given 
to customers at the time of sale shall not be Included as a part of the sales price. 

(b) Cabinetmakers who, pursuant to a construction or performance-type contract with or for the 
benefit of the owner of real property, install or affix tangible personal property, including cabinets, in 
or to real property are hable for tax on the cost or purchase price of materials and other such property 
used in performing the contract. 

History Sote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976: 
Amended Eff October 1. 1991; October I, 1988. 

.0805 SIGN FABRICATING AND PAINTING 

(a) Retail sales of electrical, neon or other made-to-order signs are subject to the four percent (three 
percent until July 16, 1991) state tax and any applicable local sales or use tax. If the vendor makes a 
separate charge for installing signs which he makes and sells, the charge for installation will not be 
subject to tax provided it is in addition to the sales price of the sign and is separately stated on the 
customer's invoice and in the vendor's records. If the vendor enters a separate contract to furnish 
maintenance or repair service subsequent to the sale of the sign, charges for such services arc not subject 
to the sales or use tax, but receipts from the sale of aU tangible personal property used in making the 
repairs are taxable. 

(b) Persons engaged in the business of painting signs on buildings or other real or personal property 
belonging to others are rendering ser\'ices, and their gross proceeds are not subject to sales or use tax. 
Sales of paint, brushes, and other tangible personal property to such sign painters are sales to purchasers 
for use or consumption and subject to the four percent (three percent until July 16, 1991) state tax and 
any applicable local sales or use tax. 



6:13 NORTH CAROLINA REGISTER September 30, 1991 S40 



FINAL RULES 



History Note: Statutory Authoritv G.S. 105-164.4; 105- 164.6; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991. 

.0806 RKPAIRS AND ALTERATIONS: GENERALLY 

(a) Sales of tangible personal property by persons engaged in the business of making repairs or al- 
terations for users or consumers are subject to the sales or use tax. Any charges for labor or services 
rendered in installing or applying such repair or alteration parts are not subject to tax provided such 
charges are segregated from the charge for the tangible p>ersonal property sold on the invoice given to 
the customer at the time of the sale and in the vendor's records; otherwise, the total amount is subject 
to tax. 

(b) Sales of tangible personal property to those engaged in repair work or alterations are sales for the 
purpose of resale if the property is to be attached to or is to become a part of the property which is 
being repaired or altered. Sales of tools, equipment and similar items to persons who use said property 
in making repairs or alterations are subject to the four percent (three piercent until July 16, 1991) state 
tax and any applicable local sales or use tax. 

History Sole: Statutory Authority G.S. 105-164.4; 105-164.5; 105-164.6; 105-262; 
Eff. February 1 , 1976; 
Amended Eff October I, 1991. 

.081 1 EIRE EXTESGUISHERS: RECHARGESG 

Chemicals and other tangible personal property sold in connection with refilling fu"e extinguishers are 
subject to the four percent (three percent until July 16, 1991) state tax and any applicable local sales 
or use tax. .\ny labor charges in connection with the refdling of fire extinguishers belonging to others 
are exempt from tax provided such charges are stated separately on the invoice given to the customer. 
In the absence of such separation the entire charge is taxable. 

History Note: Statutorv Authority G.S. 105-164.3; 105-164.4; 105-262; 
Eff February 1, 1976; 
Amended Eff. October 1. 1991. 

SECTION .0900 - ADV ERTISESG AND ADVERTISING AGENCIES 



.0901 rs GENERAL 

(a) Charges for advertising space in magazines, newspapers, and similar publications, and charges 
made for broadcasting time on radio or for telecasting time on television are not subject to sales or use 
tax. 

(b) Charges by advertising agencies to their clients pursuant to full-service agreements requiring such 
agencies to furnish advertising time or space, tangible personal property and services to conduct an 
advertising campaign on behalf of their clients on radio, television, or billboards, and in newspapers 
or other similar publications are not subject to sales or use taxes. Charges for providing such adver- 
tising do not constitute the sale of tangible personal property to such clients and are exempt from sales 
or use tax notwithstanding that the billing to the client may separately state the charge for materials, 
advertising time or space, actors' fees, agency or retainer fees and other related costs. The term "full- 
service agreement," as used in this Rule, shall mean an agreement pursuant to which an advertising 
agency agrees to prepare the nccessan' advertising materials and furnish same du"ectly to publishers or 
radio and television stations from which it has acquired space or time to conduct an advertising cam- 
paign or program for a cUent, but the term does not include catalogues, magazines, handbiUs, bro- 
chures, programs, pamphlets and similar printed matter which advertising agencies acquire or produce 
and sell to a purchaser that uses such printed material to advertise his products, business or other 
matters. 

Purchases by advertising agencies of paper, ink, printing plates, finished art, positives, negativ'cs, fdmed 
or recorded commercials, and all other tangible personal property used in providing such advertising 
are subject to sales or use tax. \Mien advertising agencies make such purchases from suppliers in North 
Carolina or from out-of-state supphers who charge the applicable tax, they should pay the tax due 
thereon directly to their suppliers. WTien advertising agencies make purchases of tangible personal 



841 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



property from out-of-state suppliers who do not coUect and remit the North Carolina state or local sales 
or use tax due thereon, the advertising agencies become liable for remitting the tax due thereon directly 
to the department on the actual cost price of such tangible personal property without any deduction 
therefrom on account of the cost of materials used, cash discounts, labor or service costs, transportation 
charges or any expenses whatsoever. 

(c) When advertising agencies produce, fabricate or acquire, catalogues, magazines, handbills, bro- 
chures, programs, pamphlets, and similar printed matter, fmished art, positives, negatives, photographs, 
filmed or recorded commercials and other tangible personal property which they sell and deliver to their 
clients or which they deliver to others on behalf of their clients for advertising purposes or for any other 
use or purpose on the part of the purchaser other than for resale, such advertising agencies are making 
retail sales of tangible personal property which are subject to the four percent (three percent until July 
16, 1991) state tax and any applicable local sales or use tax on the sales price. The retail sales price to 
which the tax applies is the total amount for which the tangible personal property is sold including all 
charges for services rendered in the fabrication, manufacture and delivery' of the property, such as 
commissions, supervision, research, transportation charges, postage, telephone and telegraph messages, 
printing plates, copy, models' fees, stage props, and film even though such charges are separately stated 
on the invoice rendered to the client at the time of the sale and in the agency's records. That portion 
of any consultation or retainer fees by advertising agencies to their clients which are attributable to and 
result in the purchase or acquisition, fabrication, production and sale of taxable tangible personal 
property by advertising agencies to their clients are a part of the retail sales price of such property 
subject to the tax even though the consultation or retainer fees may be billed separately from the charge 
for tangible personal property. 

Purchases by advertising agencies of tangible personal property which becomes a component part of 
tangible personal property produced or fabricated by such advertising agencies for resale at retail or 
wholesale or purchases by advertising agencies of tangible personal property for resale in its same form 
at retail or wholesale are exempt from sales and use taxes when such purchases are supported by 
properly completed certificates of resale. Form E-590. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991; December I, I9S4; May II, 1979. 

.0902 ADVERTISING ARTISTS: PASTE LPS AND MECHANICALS 

(a) Advertising artists who create "paste-ups" and "mechanicals" which they deliver to their clients 
are rendering professional services and the charge for such services is exempt from sales tax. Since the 
advertising artists are rendering services when they create "paste-ups" or "mechanicals" which they 
deliver to their clients, they are liable for payment of the four percent (three percent untU July 16, 1991) 
state tax and any applicable local sales or use tax on any purchases of tangible personal property for 
use in performing such services. 

(b) When an advertising artist creates "paste-ups" or "mechanicals" for use by him in producing other 
tangible personal property which he seUs at retail, the total charge for the tangible personal property 
sold at retail is subject to the four percent (three percent until July 16, 1991) state tax and any apphcable 
local sales or use tax including any charge for materials used or services rendered in creating the 
"paste-ups" or "mechanicals." Advertising artists who actually produce paintings, portraits, negatives, 
photographs, or other tangible artistic creations and sell them to users or consumers are liable for col- 
lecting and remitting the four percent rate of tax on the sales price of such articles. 

History Note: Statutory Authority G.S. 105-164.4: 105-164.6; 105-262; 
Eff. Februarv 1 , 1976; 
Amended Eff. October I. 1991; July 5, 1980. 

SECTION .1000 - BARBERS: BEALTY SHOP OPER.\TORS: SHOE REPAIRMEN: WATCH 

REPAIRMEN 



.1001 BARBER AND BEALTICIAN SLPPLIES 

(a) Sales to barber and beauty shop operators of tools, furniture, fixtures, equipment, materials, health 
and beauty aids and any and all other supplies purchased for use in connection with the operation of 
their business are subject to the four percent (three percent until July 16, 1991) state tax and any ap- 



6:13 NORTH CAROLINA REGISTER September 30, 1991 842 



FINAL RULES 



plicable local sales or use tax. Barber and beauty shop supply houses and other businesses making sales 
of the above items to barber and beauty shop operators to be used or consumed in rendering personal 
ser\ices to their customers are liable for collecting and remitting the four percent (three percent until 
July 16, 1991) state tax and any applicable local sales or use tax to this Department on such sales. 

(b) Barber and beauty shop operators who purchase hair tonics, cosmetics and other health and 
beauty aids for resale and who maintain an inventory and facilities for regularly and continuously 
making retail sales of such items to their customers are required to register with this Department as 
retail merchants and are liable for collecting and remitting the four percent (three percent untd July 16, 
1991) state tax and any applicable local sales or use tax on such sales. Barber and beauty shop oper- 
ators purchasing hair tonics, cosmetics and other health and beauty aids, some of which are regularly 
and continuously sold to their customers and some of which are used or consumed in rendering per- 
sonal services to their customers, may purchase such items without payment of tax to barber and 
beauty shop supply houses and other suppliers by furnishing the suppliers with properly executed cer- 
tificates of resale, Form E-590. By executing the certificates, the barber and beauty shop operators 
assume responsibility for payment of tax directly to this department on the sales price of items sold to 
their customers and on the cost price of items used or consumed in rendering personal services to their 
customers. I'he above provisions do not apply to barber and beauty shop operators who make occa- 
sional or infrequent sales of hair tonics and other health and beauty aids from their stock of merchan- 
dise which was purchased to be used in rendering ser\ices to their customers. Receipts of barber and 
beauty shop operators derived from rendering personal services are not taxable. 

Historv Note: Statutory Authoritv G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February I. 1976; 
Amended Eff. October I, 1991. 

.1002 SHOE REPAIR.MEN 

(a) Charges for materials used by shoe repairmen in repairing shoes or other articles for their cus- 
tomers are subject to the four percent (three percent until July 16, 1991) state tax and any applicable 
local sales or use tax. A segregation may be made between the retail charge for the materials furnished 
and the charge for labor or services rendered and in such case the tax does not apply to the labor or 
service charge separately stated. 

(b) If no segregation is made between the charges for the materials furnished and the charges for labor 
and services performed in connection with the repair work, the Secretary wiU permit shoe repairmen 
to collect and remit the tax on 40 percent of the combined pnce or charge made for the materials, labor 
and services as representing the retail charge for the materials furnished. 

(c) The sales or use tax applies to the fuU retail seUing price of tangible personal property such as 
shoes, shoe laces and shoe polish sold by shoe repairmen. 

(d) All shoe repair machinery, parts therefor, tools, equipment and supplies, other th;m those de- 
scribed in P;iragraph (e) of this Rule, sold to persons engaged in the business of repairmg shoes and 
which are used or consumed by such persons in shoe repair operations are subject to the four percent 
(three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

(e) Sales to registered merchants of leather, rubber or like products, cement, thread and other items 
of a similar nature which ordinarily become a part of or attach to shoes which are repaired and are sold 
to and dchvered with the repaired shoes to customers, including bags for deliver\' of the shoes, are sales 
for resale and may be sold on certificates of resale. Form E-590. If registered shoe repairmen purchase 
other tangible personal property for resale to their customers, their supphers should also secure certif- 
icates of resale in connection with such sales. If the items that shoe repairmen generally purchase for 
use are purchased by them for the purpose of resale to other shoe repairmen, or other users, their 
suppliers should secure a certificate of resale with each such sale to support the claim for the exemption 
from the retail tax. 

lEistoty Sole: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.1003 W.ATCH: CLOCK AND .JEWELRY REPAIRMEN 

(a) Charges for repair parts and other matenals used by watch, clock and jewelrv' repairmen in re- 
pairing watches, clocks, jeweln,- and other articles for their customers are subject to the four percent 
(three percent until July 16, 1991) state tax and any applicable local sales or use tax. A segregation 



843 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



may be made between the retail charge for the materials furnished and the charge for labor or services 
rendered and in such case the tax does not apply to the labor or service charges separately stated. 

(b) If no segregation is made between the charges for the materials furnished and the charges for labor 
and ser\'ices performed in connection with such repair work, the secretary will permit such repairmen 
to collect and remit the tax on ten percent of the combined price or charge made for the materials, labor 
and sen.ices as representing the retail charge for the materials furnished. 

(c) Sales of watches, clocks, watch bands, watch chains, trophies, jewelry and other taxable tangible 
personal property are subject to the four percent (three percent until July 16, 1991) state tax and any 
appUcable local sales or use tax on the full retail sales price. Any charges for labor or services rendered 
in engra\ing tangible personal property selected by a vendee and left with the \'endor to be engraved 
are exempt from tax when such charges are segregated from the charge for the tangible personal prop- 
erty sold on the invoice given to the customer at the time of the sale and in the vendor's records; oth- 
erwise, the total amount is subject to tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991; Februaiy I, 19SS. 

SECTION .1100 - S.ALES OF BULK TOBACCO BARNS: FARM MACHINES .\ND 

MACHINERY 



.1101 IN GENERAL 

(a) Sales to farmers of machines and machinery, and parts therefor or accessories thereto for use by 
them in planting, cultivating, harvesting or curing of farm crops including nursery stock, or to dairy 
operators, poultrv' farmers, egg producers, and livestock farmers for use by them in the production of 
dair>' products, poultry products, eggs, or livestock are subject to the one percent rate of tax with a 
maximum tax of eighty dollars ($80.00) per article of merchandise. Sales of machines and machinen,', 
and the parts therefor or accessories thereto, to farmers for any purpose or use not defmed in this Rule, 
or to any person other than a farmer as herein defmed, even though for a use or purpose herein defmed, 
are subject to the four percent (three percent until July 16, 1991) state tax and any apphcable local sales 
or use tax without limitation. In other words, to quahfy for the one percent rate of tax and the eighty 
dollar ($80.00) maximum tax per article, the transaction must be a sale of a machine or machinery', or 
parts therefor or accessories thereto, to a farmer for one of the uses or purposes herein defmed and 
unless all three conditions are met, the sale is subject to the four percent (three percent until July 16, 
1991) state tax and any applicable local sales or use tax without limit. The following sales of tangible 
personal property to farmers qualify for the one percent rate of tax with an eighty dollar ($80.00) 
maximum tax per article of merchandise: 

(1) Effective July I, 1971, sales to farmers of bulk tobacco bams, racks and all parts and accessories 
thereto and similar apparatus used for the curing and drying of any farm product are subject to 
the one percent rate of tax with a maximum tax of eighty dollars ($80.00) per article of mer- 
chandise. The sale to farmers of a bulk curing bam with perforated floors, curers, racks, fans, 
motors, dampers and flues will constitute the sale of one article and an eighty dollar ($80.00) 
maximum tax will be applicable thereto. 

(2) Effective July I, 1979, sales to farmers of grain, feed, or soybean storage facilities and accessories 
thereto, whether or not dr>ers are attached, and all similar apparatus and accessories thereto for 
the storage of grain, feed or soybeans. 

(3) Effective July 1, 1979, sales to farmers of commercially manufactured portable swine equipment 
or facilities and accessories thereto; and sales to farmers for installing on the farm of all bulk feed 
handling equipment which has been designed and constructed to be used for raising, feeding, and 
the production of livestock and poultry products and all cages used in the production of hve- 
stock and poultry products are subject to the one percent rate of tax with a maximum tax of 
eighty dollars ($80.00) per article of merchandise. Effective July 1, 1982, the sale of the total 
number of poultry cages to be sen'ed by the same automatic feeder, automatic waterer or auto- 
matic egg collector constitutes the sale of a single article that is separate and distinct from a 
feeder, waterer or egg coUector. The statute was expanded, effective July 1, 1983, to include sales 
to farmers of commercially manufactured swine. Livestock or poultry equipment or facilities and 
accessories thereto. Effective September 1, 1987, this Subparagraph is rescinded as a result of 
a statutory amendment to G.S. 105-164.13(4c). See 17 NCAC 7B .1123 for information in re- 



6:U NORTH CAROLINA REGISTER September 30, 1 99 1 S44 



FINAL RULES 



gard to the exemption from sales and use taxes for sales of articles described in this Subpara- 
graph. 
(4) Hffecti\e July I, 1982, sales of containers to farmers and producers for use in the planting, 
producing, transporting or deliverv' of their products are subject to the one percent rate of tax 
with a maximum tax of eighty dollars ($80.00) per article of merchandise when such containers 
do not go with and become a part of the sale of the product at wholesale or retail. 

(b) The following are examples of sales of machines and machiner\' and the parts therefor and ac- 
cessories thereto, which qualify for the one percent rate of tax with the eighty dollars ($80.00) maximum 
when sold to general farmers for use by them m planting, cultivating, harvesting or curing farm crops: 

(1) tractors, 

(2) plows, 

(3) harrows, 

(4) culti\ators, 

(5) mowers, 

(6) planters, 

(7) com pickers and snappers, 

(8) manure spreaders, 

(9) manure loaders, 

( 1 0) har\'ester threshers, 

(11) rotar\' tillers, 

(12) fertilizer distributors, 

(13) wind-rowers, 

(14) forage blowers, 

(15) stalk cutters, 

(16) seeders, 

(17) grain loaders, 
(IS) har\esters, 

(19) cotton pickers, 

(20) rotary hoes, 

(21) com and hay elevators, 

(22) tobacco curers, 

(23) tobacco flues, 

(24) tobacco trucks or slides, 

(25) wagons, 

(26) non-highway trailers, 

(27) mechanical rakes, 

(28) balers. 

(29) rod weeders, 

(30) combines, 

(31) tobacco transplanters, 

(32) shredders for com stalks, 

(33) power loader lifts, 

(34) platform carriers, 

(i5) portable insecticide sprayers, 

(36) chain saws, 

(37) motor oils, greases, lubricants and anti-freeze, (effective Febmary 15, 1984), 

(38) hydraulic fluids. 

(c) Examples of items which are subject to the four percent (three percent until July 16, 1991) state 
tax and any applicable local sales or use tax when sold to general farmers: 

( 1 ) lawn mowers; 

(2) snow plows; 

(3) oil storage tanks and fittings; 

(4) drainage tile; 

(5) paint, cleaning compounds and brushes; 

(6) baler twine; 

(7) tobacco sticks and tobacco twine; 

(8) tools for maintaining machinen.' and equipment; 

(9) plastic mulch, plant bed covers and tobacco canvas. 



S45 6:U NORTH CAROLINA REGISTER September iO, 1991 



FINAL RULES 



(d) The lists in Paragraphs (b) and (c) of this Rule are not intended to be exclusive, but are for il- 
lustrative purposes only. If there is any question whatever as to the tax status of any item which does 
not appear therein, such question should be submitted to the secretary, together with a detailed state- 
ment of the business of the purchaser, the design and structure of the article, and its use, to the end that 
the applicable rate of tax may be correctly determined. 

(e) The word farmer as used in this Rule includes dairy operators, poultry farmers, egg producers, 
livestock farmers, nurserymen, greenhouse operators, orchardmen and other persons coming within the 
generally accepted defmition of the word. It does not include a person who merely cultivates a garden 
for personal use. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February I. 1976; 
Amended Eff. October I, 1991; February I, I9S8; March I, 1984; December 1, I9S2. 

.1107 EGG CLEANING DETERGENT 

Sales of egg cleaning detergent to poultry farmers for use in cleaning eggs are subject to the four per- 
cent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February I, 1976; 
Amended Eff. October I. 1991. 

.1111 VENTILATORS 

Ventilators installed in tobacco bams are subject to the four percent (three percent until July 16, 1991) 
state tax and any applicable local sales or use tax. The ventUators are a part of a building or structure 
and are not classified as farm machines or machinery. 

History Note: Statutory Authority G.S. 105-164.4; 105- 164.6; 105-262; 
Eff February f 1976; 
Amended Eff October I. 1991. 

.1113 .MACHINERY STORAGE EQLIP.MENT 

Sales to dairy farmers of equipment used to store or hold machinery which is not in use are subject 
to the four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax 
unless the equipment is an integral part of an item which is properly classified as farm machinery. 
Effective September 1, 1987, sales of such commercially manufactured swine, livestock and poultry 
equipment and parts and accessories therefor placed or installed in or affixed to facilities, enclosures or 
structures specifically designed, constructed and used for housing, raising or feeding of swine, livestock 
or poultry' are exempt from sales tax. 

History Note: Statutory) Authority G.S. J 05- 164.4; 105-/64.6; 105-262; 
Eff February' I, 1976; 
Amended Eff October /, 1991; August 1, 198S. 

.1115 SNAPBEAN GRADERS 

Snapbean graders are not used in the planting, cultivating, harvesting or curing of farm crops and are 
subject to the four percent (three percent until July 16, 1991) state tax and any applicable local sales 
or use tax when sold to farmers for use. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.1118 SICKLE GRINDERS 

Sales of sickle grinders to farmers for use are subject to the four percent (three percent until July 16, 
1991) state tax and any apphcable local sales or use tax. 



History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 



6:13 NORTH CAROLINA REGISTER September 30, 1991 S46 



FINAL RULES 



Amended Eff. October I, 1991. 

.1122 RIGHT-OF-WAY EQUIPMENT 

Sales of tractors and bush-cutting equipment to power companies, railroad companies, counties, cities, 
and contractors for use in cutting and maintaining rights-of-way are subject to the four percent (three 
percent untO July 16, 1991) state tax and any applicable local sales or use tax. 

History Sole: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February I, 1976; 
Amended Eff October I, 1991; October I, 1988. 

SECTION .1200 - HOTELS: MOTELS: TOURIST CAMPS AND TOURIST CABESS 



.1201 TAXABILITY OF GROSS RECEIPTS 

(a) .AH persons engaged in the business of operating hotels, motels, inns, tounst homes, tourist camps, 
and similar type businesses and. effective August 1, 1983. all persons who rent pri\'ate residences, con- 
dominiums or cottages to transients for consideration are deemed to be retailers and must register with 
the department and collect and remit the tax herein required to be paid. The term "persons who rent 
to transients," as used in this Rule, includes: 

(1) owners of private residences, cottages, apartments, condominiums, (time share and interval 
ownership properties as hereinafter described) and similar places; and 

(2) real estate agents, including "real estate brokers" as detined in G.S. 93A-2, who rent any such 
accommodations to transients on behalf of the owners. 

When the rental agent is liable for the tax imposed, the owner is not liable. If the owner rents such 
accommodations to transients, the owner is liable for the tax and must register with this department for 
sales and use tax purposes. 

(b) Gross receipts derived from the rental of any room or rooms, lodgings or accommodations fur- 
nished by any hotel, motel, iim, tourist camp, tourist cabin and any private residence, condominium, 
(time share and interval ownership properties), cottage or any other place in which rooms, lodgings or 
accommodations are furnished to transients for a consideration are subject to the four percent (three 
percent until July 16, 1991) state tax and any applicable local sales or use tax, except as set forth in 
Paragraphs (c), (d) and (e) of this Rule or as otherwise provided by the statute. 

(c) Receipts derived from the rental of any room, lodging or accommodation to the same person for 
a period of 90 continuous days or more are not subject to the tax, and the tax collected from any person 
prior to the accumulation of such 90 continuous days of occupancy by said person shall be refunded 
to such person by the retailer collecting the same. A retailer actually making any such refund of tax 
which he has paid to the department shall be entitled to claim credit for the tax so refunded on a sub- 
sequent return tiled by him with the department. 

(d) If a rental agent enters into an agreement prior to July 16, 1991. the date the general state sales 
and use tax rate was increased from three percent to four percent, to lease rooms, lodgings or accom- 
modations to transients for a specific period of time of less than 90 continuous days, the additional one 
percent state tax wiU not apply to these rentals provided a partial deposit or the entire rent due in 
connection with the rental is received prior to the effective date of the additional one percent state tax, 
notwithstanding that the rental period might extend beyond July 16, 1991. If, however, a transient 
enters into an agreement to rent rooms, lodgings, or accommodations on or after the effective date of 
the additional tax, the gross receipts from such rentals wiU be subject to the increased rate of state tax. 
If a transient enters into an agreement prior to the effective date of the one- percent increase for the 
rental of property after July 16. 1991 but tenders no deposit, part payment, or fuU payment of the rental 
amount, such rentals wiU be subject to the four percent state plus applicable local sales tax. In this 
situation, there is merely a reser\-ation for accommodations made before the inception of the new tax 
rate and the increased levy of tax would be due when the lease payment is eventually made. 

(ei Receipts derived from an occasional or isolated rental of a private residence or cottage by the 
owner for less than a total of 15 days in a calendar year are not subject to sales tax. The 14 days ex- 
clusion is applicable only to those private residences and cottages which are not made available for 
rental to transients. If the private residence or cottage is generally or routiriely made available by the 
owner for rental to transients, the less than 15 days exclusions is not applicable to such rentals and all 
receipts therefrom are taxable without regard to the aforementioned period. When private residences 
and cottages are listed with real estate agents, including "real estate brokers" as defmed in G.S. 93.\-2, 



847 6:li NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



for rental to transients, such private residences and cottages are deemed to be generally available for 
rental to transients and the less than 15 days exclusion is not applicable to any receipts from such 
rentals to transients. 

(f) Sales of time share or interval ownership property which can be transferred by estate, gift or devise 
pursuant to deeds or documents under which the owners have a fixed and continuing right to occupy 
such units during a specified period of time in the same marmer as a person who owns or is buying a 
private residence or cottage are considered to be sales of real property not subject to sales or use tax. 
\Vhen owners of interval ownership and time share property do not occupy the property but rent it to 
transients or place the property in the hands of a rental agent, including "real estate brokers" as defmed 
in G.S. 93A-2, for rental on their behalf to transients, such receipts are subject to sales tax and the less 
than 15 days exclusion is not applicable to any receipts from such rentals as explained in Paragraphs 
(d) and (e) of this Rule. 

Histom Note: Statutory Authority G.S. 105-164.4; 105-262; 
Eff. February I, 1976; 
Amended Eff. October /, 1991; August I, 1988; July 1. 1984; January 3, 1984. 

.1202 SUPPLIES AND EQUIPMENT 

Sales to hotels, motels, inns, tourist camps, and tourist cabins and other places in which rooms, 
lodgings or accommodations are furnished for a consideration, of any supplies, equipment, or fixtures 
including but not limited to beds, bedding, bathroom supplies and furniture are subject to the four 
percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

Historv Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1. 1991. 

SECTION .1300 - SALES IN INTERSTATE CO.MMERCE 

.1301 OUT-OF-STATE DELFVERIES 

Sales within the state of tangible personal property which the vendor delivers to the purchaser at a 
point outside the state, or which the vendor delivers to a common carrier or to the mails for transpor- 
tation and delivery to the purchaser at a point outside the state are not subject to the four percent (three 
percent until July 16, 1991) state tax and any applicable local sales or use tax provided the property is 
not returned to a point within the state, and provided further, that the vendor furnishes acceptable proof 
of transportation to a point outside the state. The most acceptable proof of transportation and delivery 
to a point outside the state will be: 

(1) a waybill or bill of lading made out to the seller's order calling for dehvery; or 

(2) an insurance or registry receipt issued by the United States Postal Service, or a postal service 
receipt; or 

(3) a trip sheet signed by the seller's delivery agent and showing the signature and address of the 
person who received the delivered goods outside the state. 

History Note: Statutory Authority G.S. 105-164.13; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.1302 INSTATE DELFVERIES 

Sales of tangible personal property delivered in this state to the buyer or his agent, if such agent is not 
a common carrier, are subject to the four percent (three percent until July 16, 1991) state tax and any 
applicable local sales or use tax, notwithstanding that the buyer may subsequently transport, or employ 
someone else to transport, the property out of this state, except as provided by G.S. 105-164.13. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1. 1991; January 1, 1982; February 8, 1981; July 5, 1980. 

.1303 GIFTS: OUT-OF-STATE DONEES 



6:13 NORTH CAROLINA REGISTER September 30, 1991 <S4,S 



FINAL RULES 



Sales of printed material by vendors other than printers and sales of other taxable tangible personal 
property to any person in North Carolina which such person pro\'ides without charge to recipients, 
whether it be ad\ertising materials or gifts or donations are subject to the four percent (three percent 
until July 16, 1991) state tax and any applicable local sales or use tax even though the \endor delivers 
the property to the donee at a point outside this state and without regard to whether such deliver,' is 
made by mail, common carrier or otherwise. Sales of taxable tangible personal property delivered to 
a donee or any other user or consumer in North Carolina are taxable. 

Histon- Sote: Stalutorv Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February I. 1976; 
Amended Eff. October f 1991; .\farch I, I9S4; January 3, 1984. 

SECTION .1400 - S.ALES OF .MEDICINES: DRUGS AND .MEDICAL SUPPLIES 



.1402 MEDICrSES: SALES TO PHVSICI.ANS 

Physicians, dentists and hospitals are considered to be the users or consumers of medicines and drugs 
wliich they purchase for use in administering treatment to their patients; therefore, sales thereof to 
physicians, dentists and hospitals for such use are subject to the four percent (three percent until July 
16, 1991) state tax and any applicable local sales or use tax, and this is true notwithstanding such 
medicines and drugs may be of the type usually sold only on the prescription of a physician or dentist. 
Effective .August 1, 1988, sales of insulin are exempt from sales or use tax whether or not sold on pre- 
scription. If a physician or dentist should, in fact, make outright sales of medicines or drugs to his 
patients or to other consumer customers, such sales are exempt from sales or use tax provided such 
medicines or drugs are sold on written prescription of the physician or dentist, or another physician or 
dentist, and a record is made of each such sale and kept, along with the written prescription, as a part 
of the seller's permanent records. If a hospital maintains a pharmacy from which sales of drugs and 
medicines are made to individuals or to patients for their use after they leave the hospital, such sales 
are exempt from tax provided they are made on written prescription of a physician or dentist and a 
record of the sale and the prescription is kept in the manner described in 17 NC.\C 7B .1401. An entry 
on a patient's medical record card or chart of medicines or drugs for such patient does not meet the 
requirements of a written prescription. Physicians, dentists and hospitals making sales of medicines and 
drugs, as set forth above, may purchase the medicines and drugs which they will resell or use in ad- 
ministering treatment to their patients without payment of tax to their vendors if the physician, dentist 
or hospital making the purchase has registered with the Department of Revenue for sales and use tax 
purposes and furnished his vendor properly executed certificates of resale. Form E-590. In such cases, 
the physicians, dentists or hospitals become liable for remitting the four percent (three percent until July 
16, 1991) state tax and any applicable local sales or use tax directly to this department on the cost price 
of the medicines and drugs which they use in administering treatment to their patients, and the medi- 
cines and drugs sold on written prescription for subsequent use by the patient wlU be exempt from tax. 

[Iistor\- Sote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1. 1976; 
Amended Eff. October f 1991; .\ugusl /, 19SS. 

.1403 NONPRESCRIPTION MEDICINES AND DRUGS 

Sales of medicines or drugs, other than insulin, to users or consumers, except when the sales are made 
pursuant to a prescription of a physician or dentist or as a refill of a written prescription, as referred to 
in 17 NCAC 7B .1401, are subject to the four percent (three percent until July 16, 1991) state tax and 
any applicable local sales or use tax. 

History Sote; Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1, 1976; 
.Amended Eff. October 1, 1991; August 1, 19SS. 

.1404 SUPPLIES: SALES TO PHYSICIANS 

Sales to physicians, dentists, hospitals or other users or consumers of medical supplies, including such 
items as cotton, gauze, adhesive tape, bandages and other dressings and medical instruments and 
equipment such as knives, needles, scissors, microscopes, x-ray machines and other laboratop." equip- 



S49 6:13 NORTH CAROLINA REGISTER September iO, 1991 



FINAL RULES 



ment used for testing and diagnosis, and for the prevention, treatment or cure of disease are subject to 
the four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1, 1976; 
Amended Eff. October 1. 1991. 

SECTION .1500 - FINANCE COMPANIES: FINANCE CHARGES AND CARRYING 

CHARGES 



.1501 FIN ANCE COMPANIES 

(a) If a finance company maintains a regular place of business wherein repossessed tangible personal 
property is sold or placed on display for sale as an adjunct to the principal business of the fmance 
company, such fmance company must register with the department and collect and remit the four 
percent (three percent until July 16, 1991) state tax and any applicable local tax on its sales. 

(b) If a fmance company, as an incident only of its fmance business, has occasion, from time to time, 
to repossess articles of tangible personal property upon which payments have become delinquent and 
sells such tangible personal property either at public auction or at private sale, such sales shall be 
deemed occasional sales and are not subject to the tax. 

History Note: Statutory Authority G.S. 105-164.3; 105-164.4; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1. 1991. 

SECTION .1600 - SALES TO OR BY HOSPITALS: EDUCATIONAL: CHARITABLE OR 
RELIGIOUS INSTITUTIONS: ETC.: AND REFUNDS THERETO 



.1601 INSTITUTIONS: ETC.: SALES TO OR BY 

(a) Sales of taxable tangible personal property to hospitals not operated for profit, educational insti- 
tutions not operated for profit, churches, orphanages, and other charitable or religious institutions or 
organizations not operated for profit are subject to sales or use tax when such property is purchased for 
use or consumption. Sales of building materials, supplies, fixtures, and equipment to contractors for 
use in the performance of contracts with any institution or organization named in this Rule are also 
subject to sales or use tax. 

(b) Sales of tangible personal property to nonprofit organizations such as chambers of commerce, 
civic clubs, fraternities, sororities or other fraternal, civic or patriotic organizations for use or con- 
sumption are subject to sales or use tax and such organizations are not entitled to any refund. 

(c) When any institution or organization named in this Rule makes taxable purchases of tangible 
personal property from a North CaroHna supplier or a registered out-of-state supplier who charges the 
North Carolina and any applicable local sales or use tax thereon, such institution or organization must 
remit the tax on such purchases to the suppher. Any such institution or organization making taxable 
purchases of tangible personal property from an out-of-state supplier who does not coUect the North 
Carolina and any applicable local sales or use tax thereon is required to register with the department 
and file retums monthly with remittance of the tax due on such purchases. Any such institution or 
organization which does not owe any tax for a given month should fde a report reflecting no tax due. 

(d) If any institution or organization named in this Rule makes taxable retail sales, it must register 
with the department and collect and remit the tax due on such sales. The refund provisions contained 
in 17 NCAC 7B .1602 do not apply to the tax on such sales and no part thereof shall be refunded or 
claimed as a refund. Institutions and organizations properly registered for sales and use tax purposes 
may purchase the tangible personal property which they resell without paying tax thereon to their 
suppliers provided they have furnished such suppliers with properly executed certificates of resale, Form 
E-590. Certificates of resale may not be used by any institution or organization named in this Rule, 
or by any other vendee, in making purchases of tangible personal property to be used or consumed by 
such purchaser. 

(e) Sales of items by a nonprofit civic, charitable, educational, scientific or literary orgardzation are 
exempt from tax when the net proceeds of the sales will be given or contributed to the State of North 
Carolina or to one or more of its agencies or instrumentalities, or to one or more nonprofit charitable 



6:15 NORTH CAROLINA REGISTER September iO, 1991 850 



FINAL RULES 



organizations, one of whose purposes is to sen.'e as a conduit through which such net proceeds will flow 
to the state or to one or more of its agencies or instrumentalities. 

(f) Sales by a nonprofit civic, charitable, fraternal, educational, scientific or hterar>' organization 
continuously chartered or incorporated within North Carolina for at least two years are exempt from 
the tax when such sales are conducted only upon an annual basis for the purp>ose of raising funds for 
its acti\ities and when the proceeds therefrom are actually used for such purposes; however, the sales 
are not exempt if they are not actually consummated within 60 days of the first solicitation of any sales 
made during the organization's annual sales period. 

(g) Effective October 1, 1990, sales of food by a church or religious organization not operated for 
profit are e.xempt from sales and use taxes when the proceeds of the sales are actually used for religious 
activities. 

Histon- Sote: Statutory Authority G.S. 105-164.4: 105-164.6; 105-164.13: 105-262; 
Eff. February 1, 19'' 6; 
.Amended Eff. October 1, 1991; January I, 1982; July 5, 1980. 

.1602 REFLADS TO INSTITL TIONS: ETC. 

(a) Subject to the terms and conditions herem set forth, hospitals not operated for profit, educational 
institutions not operated for profit, churches, orphanages, and other charitable or religious institutions 
or organizations not operated for profit are entitled to semiannual refunds of sales and or use taxes paid 
by them in North CaroUna on their direct purchases of tangible personal property used in carrying on 
their nonprofit work. For refund purposes, purchases by contractors of building materials, supphes, 
fixtures and equipment which become a part of or are annexed to any budding or structure being 
erected, altered or repaired under contract with any such institution or organization and which are used 
in carrying on the nonprotit activities of such institution or organization are deemed to be direct pur- 
chases. Prior to January 1, 1984. the provisions of this Rule apply to out-of-state institutions and or- 
ganizations only to the extent of sales or use tax paid by them in this state on tangible personal property 
purchased for use in this state in carrying on charitable, religious or educational acti\ities which are not 
for profit. On and after Januars' 1, 1984, the provisions of this Rule apply to out-of-state institutions 
and organizations to the extent of sales or use ta.xes paid by them in this state on purchases of tangible 
personal property for use in carr>'ing on charitable, religious or educational activities uithin or without 
this state which are not for protit. 

lb) In addition to the pro\isions in (a) of this Rule for refunds of sales and or use taxes paid by 
hospitals not operated for profit, all other hospitals not specifically excluded herein are entitled to 
semiannual refunds of sales and or use taxes paid on and after July 1, 1977, by them on medicines and 
drugs purchased for use in carrying out the work of such hospitals. 

(c) Refund claims of the organizations and institutions named in Paragraph (a) of this Rule must be 
filed u ith the North Carolina Department of Revenue co\'ering the first six months of the calendar year 
on or before the 15th day of October following the close of the first six months period. Refund claims 
covering the second six months of the calendar year must be filed on or before the 1 5th day of .April 
following the close of the second six months period. Refund claims filed after the due date shall be 
subject to the following penalties for late filing: 

( 1 ) refund claims fded within 30 days after the due date, 25 percent; 

(2) refund claims fded more than 30 days after the due date but within six months of the due date, 
50 percent. 

The amount of the penalties in this Rule shall be deducted from the face amount of the refund due the 
claimant. The statute prohibits the payment of any refund claim not filed within the stipulated time. 

(d) .-Ml refund claims must be substantiated by proper documentary proof and only the taxes actually 
paid by the claimant during the period for which the claim for refund is fded may be included in the 
claim. Any local sales or use taxes included in the claim must be separately stated in the claim for re- 
fund. In cases where more than one county's tax has been paid, a breakdown must be attached to the 
claim showing the amount of each county's local tax separately. 

(e) As to taxes paid on the claimant's purchases for use, other than those made by contractors per- 
forming work for the claimant, invoices or copies of invoices showing the property purchased, the cost 
thereof the date of purchase and the amount of state and local sales or use tax paid during the refund 
period will constitute proper documentaiA" proof 

(f) To substantiate a refund claim for sales or use taxes paid on purchases of building materials, 
supplies, fixtures and equipment by its contractor, the claimant must secure from such contractor cer- 
tified statements setting forth the cost of the property purchased from each vendor and the amount of 



851 6:13 SORTH CAROLINA REGISTER September iO, 1991 



FINAL RULES 



state and local sales or use taxes paid thereon. In the event the contractor makes several purchases from 
the same vendor, such certified statement must indicate the invoice numbers, the inclusive dates of the 
invoices, the total amount of the invoices and the sales and use taxes paid thereon. Such statement 
must also include the cost of any tangible personal property withdrawn from the contractor's warehouse 
stock and the amount of state and local sales or use tax paid thereon by the contractor. Similar certified 
statements by his subcontractors must be obtained by the general contractor and furnished to the 
claimant. Any local sales or use taxes included in the contractor's statements must be shown separately 
from the state sales or use taxes. The contractor's statements must not contain sales or use taxes paid 
on purchases of tangible personal property by such contractors for use in performing the contract which 
does not annex to, affix to or in some manner become a part of the building or structure being erected, 
altered or repaired for the institutions and orgaruzations named in Paragraph (a) of this Rule. Exam- 
ples of property on which sales or use tax has been paid by the contractor and which should not be 
included in the contractor's statement are scaffolding, forms for concrete, fuel for the operation of ma- 
chinery and equipment, tools, equipment repair parts, equipment rentals and blueprints. 

(g) The refund provisions set forth in this Regulation apply only to institutions and organizations 
described in Paragraphs (a) and (b) of this Rule, but do not apply to nonprofit fraternal, civic or pa- 
triotic orgaruzations, notwithstanding that such organization may perform certain charitable functions. 
The refund provisions set forth in this Regulation do not apply to organizations, corporations and in- 
stitutions which are owned and controlled by the United States, the state or a unit of local government 
except hospital facilities created under Article 12 of Chapter 131 of the General Statutes and nonprofit 
hospitals owned and controlled by a unit of local government that elect to receive semiannual refunds 
under G.S. 105- 154. 14(b) instead of annual refunds under G.S. 105- 164. 14(c). Any nonprofit hospital 
owned and controlled by a unit of local government may submit a written request to receive semiannual 
refunds under G.S. 105-164. 14(b) instead of annual refunds under G.S. 105-164. 14(c). The request is 
effective beginning with the six-months refund period following the date of the request and applies to 
sales or use taxes paid on or after the first day of the refund period for which the request is effective. 

(h) The refund provisions of this Regulation are not applicable to sales taxes incurred by employees 
on purchases of food, lodging or other taxable travel expenses paid by employees and reimbursed by 
the type institutions and organizations named in Paragraph (a) of this Rule. Such expenses are per- 
sonal to the employee since the contract for food, shelter and travel is between the employee and the 
provider and payment of the tax is by the employee individually and personally. Such institutions and 
organizations have not incurred and have not paid any sales tax liability. In such cases, it has chosen 
to reimburse a personal expense of the employee. The refund provisions of this Regulation do not 
apply to sales tax paid by the organizations and institutions named in (a) of this Regulation on charges 
by a utility for electricity, piped natural gas and local, toU or private telecommunications services; to 
the occupancy taxes levied and administered by certain counties and cities in this state; to the highway 
use taxes paid on the purchase, lease or rental of motor vehicles; to the scrap tire disposal fee levied 
on new motor vehicle tires; or to the scrap tire disposal tax levied on new motor vehicle tires. Such 
taxes should not be included in any claim for refund filed by such institutions and organizations. 

History Note: Statutory Authority G.S. 105-164.14; 105-262; 105-264; 
Eff. February I. 1976; 
Amended Eff. October I, 1991; May I, 1990; February I, I9SS; February I, 1987. 

SECTION .1700 - SALES TO OR BY IHE STATE: COLTSTIES: CITIES: AND OTHER 

POLITICAL SUBDFV ISIONS 



.1701 GOVERNMENTAL SALES AND PURCHASES 

(a) Sales of tangible personal property not specifically exempt by statute to the State of North 
Carolina, counties, cities, towns, and political subdivisions or any agencies thereof for the purpose of 
use or consumption are subject to the four percent (three percent until July 16, 1991) state tax and any 
apphcable local sales or use tax, except, effective August 1, 1986, sales of tangible personal property, 
local telecommunications services, electricity and piped natural gas and the sales tax levied, effective 
January 1, 1989, on gross receipts derived from toll and private telecommunications services directly to 
the Department of Transportation are exempt from sales and use taxes. However, the exemption does 
not extend to sales of tangible personal property to contractors for use in the performance of contracts 
with the Department of Transportation nor to sales of tangible personal property to other state agen- 
cies, local governments or employees of the Department of Transportation. Sales of building materials, 



6:li NORTH CAROLINA REGISTER September iO, 1991 S52 



FINAL RULES 



supplies, fixtures and equipment to contractors for use in the performance of contracts with the federal 
government or any above referred to governmental units or agencies are also subject to the sales or use 
tax. 

(b) When the State of North Carolina, counties, cities, towns, and political subdivisions or any 
agencies thereof make taxable purchases of tangible personal property from a North Carolina supplier 
or registered out-of-state supplier who charges the North Carolina and any applicable local sales or use 
tax thereon, such governmental unit or agency must remit the tax on such purchases to the supplier. 
/Vny such go\emmental unit or agency making taxable purchases of tangible personal property from 
an out-of-state supplier who does not coUect the North Carolina and any applicable local sales or use 
tax thereon is required to register with the department and remit monthly the tax due on such pur- 
chases. Any governmental unit or agency so required to register which does not owe any tax for a given 
month should file a report reflecting no tax due. 

(c) If any governmental unit or agency referred to in Paragraph (b) of this Rule makes taxable retail 
sales of tangible personal property, it must register with the department and collect and remit the tax 
due on such sales. The refund provisions contained in G.S. 105-164. 14(c) do not apply to the tax on 
such sales and no part thereof shall be refunded or claimed as a refund. Govenimental units and 
agencies properly registered for sales and use tax purposes may purchase the tangible personal property 
which they resell without paying tax thereon to their suppliers provided they have furnished such sup- 
pUers with properly executed certificates of resale. Form E-590. Certificates of resale may not be used 
by any governmental unit or agency herein referred to, or by any other vendee, in making purchases 
of tangible personal property to be used or consumed by such purchaser. 

History Sole: Statutory Authority G.S. I05-I64.4: 105-164.6; 105-262; 
Eff. February I, 1976: 
Amended Eff. October 1. 1991; May I, 1990; February I. 1987; January I, 19S2. 

.1702 REFLADS TO COLATIES: CFFIES: ETC. 

(a) Governmental entities, as defined by G.S. 105-164. 14(c), are entitled to an annual refund of sales 
and/or use taxes paid by them on their direct purchases of tangible personal property, subject to the 
terms and conditions hereafter set forth. The refund provisions of this Rule are not applicable to sales 
taxes incurred by employees on purchases of food, lodgings or other taxable travel expenses paid by 
employees and reimbursed by governmental entities. Such expenses are personal to the employee since 
the contract for food, shelter and travel is between the employee and the provider and payment of the 
tax is by the employee individually and personally. The governmental entity has not paid any sales tax 
liability. In such cases, it has chosen to reimburse a personal expense to the employee. The refund 
provisions of this Rule do not apply to sales taxes paid by the organizations and institutions named 
herein on charges by a utility for electricity, piped natural gas and local, toll or private telecommuni- 
cations services; to the occupancy ta.xes levied and administered by certain counties and cities in this 
state; to the highway use taxes paid on the purchase, lease or rental of motor vehicles; to the scrap tire 
disposal fee levied on new motor vehicle tires; or to the scrap tire disposal tax levied on new motor 
vehicle tires. Governmental entities and the Federal Government are entitled to annual refunds of sales 
and/or use taxes paid in North Carolina by their contractors on purchases of building materials, sup- 
plies, fixtures and equipment which become a part of or are annexed to any building or structure being 
erected, altered or repaired under contract with such go\emmental entities which is owned or leased 
by such governmental entities^ 

Effective July 1, 1991, G.S. 105-164.14 was amended by adding a new subdivision (e) which authorizes 
refunds of county sales and use taxes paid by state agencies on their direct purchases for use. It also 
includes sales and use taxes paid by their contractors on building materials, supplies, fixtures and 
equipment that become a part of or annexed to a building or structure that is being erected, altered or 
repaired and is owned or leased by a state agency. Claims are to be filed quarterly within 15 days of 
the close of each calendar quarter. Notwithstanding the provisions of G.S. 105- 164. 14(c), the constit- 
uent institutions of the University of North Carolina may obtain in the manner prescribed in G.S. 
105-164. 14(c) a refund of sales and use tax paid by them on or after January 1, 1992, on tangible per- 
sonal property acquired by them through the expenditure of contract and grant funds. 

(b) .-Ml refund claims must be substantiated by proper documentary proof and only those taxes ac- 
tually paid by the claimant during the fiscal year covered by the refund claim may be included in the 
claim. /\ny local sales or use taxes included in the claim must be separately stated in the claim for re- 
fund. In cases where more than one county's sales and use tax has been paid, a breakdown must be 
attached to the claim for refund showing the amount of each county's local tax separately. 



853 6:13 NORTH C.AROLIN.i REGISTER September 30, 1991 



FINAL RULES 



(c) As to taxes paid by governmental entities on purchases for use, other than those made by con- 
tractors performing work for the claimant, invoices or copies of invoices showing the property pur- 
chased, the cost thereof, the date of purchase, the amount of state and local sales or use tax paid thereon 
and a record reflecting the date of payment will constitute proper documentary proof. 

(d) To substantiate a refund claim for sales or use taxes paid on purchases of building materials, 
supplies, fixtures, and equipment by its contractor, the claimant must secure from such contractor 
certified statements setting forth the cost of the property purchased from each vendor and the amount 
of state and local sales or use taxes paid thereon. In the event the contractor makes several purchases 
from the same vendor, such certified statement must indicate the invoice numbers, the inclusive dates 
of the invoices, the total amount of the invoices, and the state and local sales and use taxes paid 
thereon. Such statement must also include the cost of any tangible personal property withdrawn from 
the contractor's warehouse stock and the amount of state and local sales or use tax paid thereon by the 
contractor. Similar certified statements by his subcontractors must be obtained by the general con- 
tractor and furnished to the claimant. Any local sales or use taxes included in the contractor's state- 
ments must be shown separately from the state sales or use taxes. The contractor's statements must 
not contain sales or use taxes paid on purchases of tangible personal property purchased by such con- 
tractors for use in performing the contract which does not annex to, affix to or in some manner become 
a part of the building or structure being erected, altered or repaired for the governmental entities as 
defmed by G.S. 105-164. 14(c). Examples of property on which sales or use tax has been paid by the 
contractor and which should not be included in the contractor's statement are scaffolding, forms for 
concrete, fuel for the operation of machinery and equipment, tools, equipment repair parts and equip- 
ment rentals, blueprints, etc. 

History Note: Statutory Authority G.S. 105-164.14; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991; May I, 1990; February I, 1987; August 1, 1986. 

.1703 SALES TO STATE 

Sales of food products and other tangible personal property to the State of North Carolina, its political 
subdivisions or agencies for use and not for resale are subject to the four percent (three percent until 
July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-/64.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October I, 1991; July 5, 1980. 

.1705 HOUSING AUTHORITIES 

Sales of taxable tangible personal property to housing authorities created and existing under Chapter 
157 of the North Carolina General Statutes for use in carrying on their activities are subject to the four 
percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1. 1976; 
Amended Eff. October I, 1991; August I, 1988; March I, 1984. 

.1706 PRISON CONCESSION STANDS 

Effective August 1, 1991, the sales tax exemption for prison concession stands was repealed. Such 
sales are subject to the four percent state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-/64.6; 105-262; 105-264; 
Eff October 1, 1991. 

SECTION .1800 - HOSPITALS AND SANITARIUMS 



.1801 SALES TO AND BY HOSPITALS: ETC. 

(a) Hospitals, sanitariums, nursing homes and rest homes are primarily engaged in rendering services 
and are deemed to be the users or consumers of all tangible personal property which they purchase for 
use in connection with the operation of such institutions. Hospitals, sanitariums, nursing homes and 



6:B NORTH CAROLINA REGISTER September 30, 1991 854 



FINAL RULES 



rest homes are, therefore, liable for payment of sales or use tax on their purchases of such property 
except as hereinafter set forth. 

(b) Hospitals, sanitariums, nursing homes and rest homes are deemed to be the users or consumers 
of drugs or medicines which they administer to patients. Purchases by hospitals, sanitariums, nursing 
homes and rest homes of drugs or medicines, other than insulin, for such use are subject to the four 
percent (three percent until July 16, 1991) state tax and any appUcable local sales or use tax. Effective 
August 1, 1988, sales of insulin are exempt from sales or use taxes whether or not sold on prescription. 
If, in addition to using drugs or medicines m administering to patients, a hospital, sanitarium, nursing 
home or rest home operates a pharmacy from which it makes across the counter sales of medicines and 
drugs, and all purchases of medicines and drugs by such institution are made through the pharmacy, 
then the drugs or medicines may be purchased without payment of tax to supphers provided the insti- 
tution is registered with the Department of Revenue for sales or use tax purposes and has furnished the 
suppliers with properly executed certificates of resale, Form E-590. By executing the certificate of re- 
sale, the institution assumes the liability for payment of and must pay directly to the department all 
sales or use taxes due on drugs and medicines which are used by the institution in administering to and 
caring for its patients. Sales of drugs and medicines by the pharmacy on prescription of physicians and 
dentists are exempt from tax. Sales of drugs and medicines without written prescriptions of physicians 
or dentists are taxable at the four percent (three percent until July 16, 1991) state tax and any applicable 
local rate; except, effective August 1, 1988, sales of insulin are exempt from sales or use tax whether 
or not sold on prescription. Sales of drugs and medicines, other than insulin, to physicians and dentists 
who administer the same to their patients in rendering professional services are also subject to the four 
percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

(c) Purchases by hospitals, sanitariums, nursing homes or rest homes of foodstuffs for use in fur- 
nishing mciils to patients are subject to the four percent (three percent until July 16, 1991) state tax and 
any applicable local sales or use tax. If, in addition to furnishing meals to patients, a hospital, 
sanitarium, nursing home or rest home operates a cafeteria from which it makes sales of prepared meals 
or foods to guests, visitors, employees, staff or other persons such institution must register with the 
Department of Revenue and coUect and remit the tax on its sales. If the foodstuffs purchased by such 
institution for use in furnishing meals to patients cannot be distinguished from those purchased for re- 
sale through the cafeteria, the hospital, sanitarium, nursing home or rest home may purchase all the 
foodstuffs under a certificate of resale. The hospital, sanitarium, nursing home or rest home thus as- 
sumes liability for payment of the four percent (three percent until July 16, 1991) state tax and any 
apphcable local sales or use tax on foodstuffs used in furnishing meals to its patients and the four per- 
cent (three percent until July 16, 1991) state tax and any applicable local sales tax on sales of meals by 
the cafeteria. 

(d) .Meals and food products served to students in dining rooms regularly operated by state or private 
educational institutions are exempt from tax; thus, if a hospital serves meals and food products to stu- 
dent nurses, such sales are exempt from tax. 

(e) Sales of crutches, artificial limbs, artificial eyes, hearing aids, false teeth, eyeglasses ground on 
prescription of physicians, ocuhsts or optometrists, and other orthopedic appliances w^hen the same are 
designed to be worn on the person of the owner or user are not subject to sales or use tax; therefore, 
any sales of such property to hospitals, sanitariums, nursing homes or rest homes are exempt from the 
tax. 

(f) Except as provided by Paragraphs (b) and (c) of this Rule, certificates of resale. Form E-590, may 
not be used by hospitals, sanitariums, nursing homes or rest homes when making taxable purchases 
of tangible personal property for use or consumption. The tax due on taxable purchases from North 
Carolina suppliers or out-of-state suppliers who charge North Carolina sales or use tax must be paid 
to the suppliers. Hospitals, sanitariums, nursing homes or rest homes which make taxable purchases 
from out-of-state suppliers who do not collect and remit North Carolma sales or use tax thereon must 
register with the department and remit monthly the tax due on such purchases. 

History Sole: Statutory Authoritv G.S. 105-164.4; 105-164.6; 105-262; 
Eff. Febi-uary 1, 1976: 
Amended Eff. October /, 799/; July I, 19S9. 

.1802 REFLADS TO HOSPFFALS: ETC. 

(a) Hospitals, sanitariums and charitable or religious nursing homes or rest homes not operated for 
profit are entitled to semiannual refunds of sales and/or use taxes paid by them on their direct purchases 
of tangible personal property, including medicines and drugs, for use in carPving on their work. For 



855 6:13 NORTH CAROLINA REGISTER September 30, I99I 



FINAL RULES 



the purpose of the refund, sales or use taxes paid by contractors on their purchases of buUding materi- 
als, supplies, fixtures and equipment which become a part of or are annexed to a building or structure 
being erected, altered or repaired under contract with such hospitals, sanitariums, nursing homes or rest 
homes for use in carrying on their nonprofit activities are deemed to be taxes paid on direct purchases. 
In addition to the above provisions for refunds of sales and/or use taxes paid by hospitals, sanitariums 
and charitable or religious nursing homes or rest homes not operated for profit, all other institutions 
not specifically excluded herein are entitled to semiannual refunds of sales and/or use taxes paid on and 
after July 1, 1977, by them on medicines and drugs purchased for use in carrying out the work of such 
hospitals, sanitariums, nursing homes or rest homes. 

(b) As to taxes paid on purchases for use other than those made by contractors performing work for 
the claimant, invoices or copies of invoices showing the property purchased, the cost thereof, the date 
of purchase and the amount of sales or use tax paid thereon during the refund period will constitute 
proper documentary proof. To substantiate a refund claim for sales or use taxes paid on purchases of 
building materials, supplies, fixtures and equipment by its contractor, the claimant must secure from 
such contractor certified statements setting forth the cost of the prop)erty purchased from each vendor 
and the amount of sales and use taxes paid thereon. In the event the contractor makes several pur- 
chases from the same vendor, the certified statements may indicate the invoice numbers, the inclusive 
dates of the invoices, the total amount of the invoices and the sales or use taxes paid thereon in heu 
of an itemized listing of each separate invoice. The statements must also include the cost of any tan- 
gible personal property withdrawn from the contractor's warehouse stock and the amount of sales or 
use tax paid thereon by the contractor. Similar certified statements by his subcontractors must be 
obtained by the general contractor and furnished to the claimant. 

(c) Sales and/or use taxes paid by hospitals, sanitariums, nursing homes or rest homes which are 
agencies of counties and incorporated cities and towns on their direct purchases of tangible personal 
property, including medicines and drugs, and by their contractors on purchases of building materials, 
supplies, fixtures and equipment becoming a part of or annexing to a building or structure being 
erected, altered or repaired under contract with such institutions are also refundable; however, such 
refund must be included in the claim fded by the county or incorporated city or town which is to be 
filed within six months after the close of the claimant's fiscal year. In such cases, the documentary 
proof as explained in Paragraph (b) of this Rule should be submitted to the county or incorporated city 
or town filing the claim. The refund provisions are not applicable to hospitals, sanitariums, nursing 
homes or rest homes which are agencies of the state or any political subdivisions therof other than 
counties and incorporated cities and towns. Nonprofit hospitals, sanitariums, nursing homes or rest 
homes owned and controlled by a unit of local government may fde for a refund on a semiannual basis 
under G.S. 105- 164. 14(b) rather than fde annually as a part of the local government unit. In order to 
file semiarmuaUy, the institution must submit a written request to do so to the Secretary of Revenue 
and the request is effective beginning with the six-months refund period following the date of the re- 
quest and applies to sales and use tax paid on or after the first day of the refund period for which the 
request is effective. 

(d) The refund provisions set forth in Paragraphs (a), (b) and (c) of this Rule are not applicable to 
taxes paid by hospitals, sanitariums, nursing homes or rest homes on their taxable sales and no part 
thereof shall be refunded or claimed as a refund. Furthermore, the refund provisions are not applicable 
to sales tax incurred by employees on purchases of food, lodgings or other taxable travel expenses paid 
by employees and reimbursed by the institution. Such expenses are personal to the employee since the 
contract for food, shelter and travel is between the employee and the provider and payment of the tax 
is by the employee individually and personally and such tax shall not be refunded under the provisions 
of this Rule. The institution has incurred and paid no sales tax liability. In such cases, it has chosen 
to reimburse a personal expense of the employee. 

(e) The refund provisions set forth in Paragraphs (a), (b) and (c) of this Rule are not applicable to 
sales taxes paid by hospitals, sanitariums, nursing homes or rest homes on charges by a utility for 
electricity, piped natural gas and local, toll or private telecommunications services; to the occupancy 
taxes levied and administered by certain counties and cities in this state; to the highway use taxes paid 
on the purchase, lease or rental of motor vehicles; or to the scrap tire disposal fee levied on new motor 
vehicle tires; or to the scrap tire disposal tax. Such taxes should not be mcluded in any claim for refund 
filed by such institutions and organizations. 

History Note: Statutory Authority G.S. J 05- J 64. J 4; 105-262; 105-264; 
Eff. February I, 1976; 
Amended Eff. October 1, 1991; May I, 1990; May I, 1985; January 3, 1984. 



6:13 NORTH CAROLINA REGISTER September 30, I99I S56 



FINAL RULES 



.1804 OXYGEN 

Sales of oxygen and oxygen dispensing equipment to hospitals, sanitariums, nursing homes or rest 
homes for use in administering oxygen to patients are subject to the four percent (three percent until 
July 16, 1991) state tax and any applicable local sales or use tax. Sales of oxygen on written pre- 
scription of a physician or dentist are exempt from sales tax. 

History Note: Statutory Authority G.S. 105-164.4; /05-/64.6; 105-164.13; 105-262; 
Eff. February 1, 1976; 
Amended Eff. October 1, 1991; January 1, 1982. 

.1805 HOSPITAL SUPPLIES 

Sales of linens, soap, toilet paper, kleenex-type tissues, and other supplies to sanitariums, hospitals and 
similar institutions and businesses for use subject to the four percent (three percent until July 16, 1991) 
state tax and any applicable local sales or use tax. 

Historv Sote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

SECTION .1900 - TIRE RECAPPERS AND RETREADERS: TIRE AND TUBE REPAIRS 



.1905 SALES TO TIRE RECAPPERS 

(a) Sales to tire recappers of camelback or other rubber products, cement and rubber solvent, cord 
fabric, wheel weights and other items of a similar nature which enter into or become an ingredient or 
component part of the recapped tires or are attached to and delivered with the tires to the customer are 
exempt from tax. 

(b) Effective January 1, 1985, the gross receipts derived by a utility from sales of electricity and piped 
natural gas to tire recappers for use in connection with the operation of the recapping plant are subject 
to the three percent state rate of tax. Sales of other fuel to tire recappers for use in connection with the 
operation of the recapping plant are subject to the one percent rate of tax. 

(c) Sales to tire recappers of mill machinery, or parts and accessories therefor, for use exclusively in 
the recapping process are subject to the one percent rate of tax, with a maximum tax of eighty dollars 
($80.00) per article. Effective July 1, 1977, sales to contractors and subcontractors of mill machinery 
or mill machinery parts and accessories for use by them in the performance of contracts with manu- 
facturing industries and plants and sales to subcontractors purchasing mill machinery or mill machinery 
parts and accessories for use by them in the performance of contracts encompassed In such contracts 
with manufacturing industries and plants are subject to a one percent rate of tax, with a maximum tax 
of eighty dollars ($80.00) per article where applicable. Such mill machinery or mill machinery parts 
and accessories must be for use by tire recappers in the production process, as the term "production" 
is defmed in 17 XCAC 7B .0202(a)(1), to qualify for the one percent rate of tax with a maximum tax 
of eighty dollars ($80.00) per article when purchased by such contractors or subcontractors. Contrac- 
tors and subcontractors may obtain Contractor's and Subcontractor's Certificate, Form E-580, from 
the Sales and Use Tax Division, North Carolina Department of Revenue, to be executed by them and 
furnished to their vendors in connection with such purchases as the vendor's authority to apply the one 
percent rate of tax thereto: 

(1) wire brushes; 

(2) mold lube; 

(3) curing tubes and rims; 

(4) molds and matrices; 

(5) buffmg equipment; 

(6) buffmg discs; 

(7) buffmg rasps; 

(8) rasp teeth; 

(9) crayon for marking tires; 
(10) tire trimmers; 

(U) boilers; 



857 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



(12) tire handling equipment used exclusively between the beginning and ending steps of the 
recapping process; 

(13) inspection spreaders used exclusively to inspect casing being recapped; 

(14) spinners used for applying cement used on casings being recapped; 

( 1 5) pre-condensing tanks for air lines used for applying cement, dusting buffed casings, and inflating 
curing tubes; 

(16) casing balancers used exclusively in balancing casing to be recapped; 

(17) tread builders used to apply tread rubber to casing being recapped; 

(18) air compressors used exclusively in retreading or recapping process; 

(19) dust coUectors; 

(20) knives, stitchers, rollers, shears, awls, splicing tools, etc., used to perform work on the ingredient 
material or the manufactured product; 

(21) thermometers, pyrometers, and durometers used in testing mold heat and cure hardness of the 
rubber used in the recapping process; 

(22) bagging and debagging equipment; 

(23) sprayers used exclusively in the recapping process; 

(24) matrix loaders; 

(25) steam traps and valves used in steam lines for curing molds; 

(26) mold cleaners. 

(d) The following are examples of items which are subject to the four percent (three percent until July 
16, 1991) state tax and any applicable local sales or use tax when sold to tire recappers for use or con- 
sumption: 

(1) motor vehicle jacks; 
~ (2) tire tools not used between the beginning and ending recapping processes; 

(3) balancing machinery used after recapping process is completed; 

(4) equipment used to remove tires from the rim before the recapping process begins; 

(5) administrative equipment such as office supplies, fde cabinets and other office equipment; 

(6) cleaning compound for janitorial and sanitary purposes; 

(7) uniforms for employees; 

(8) advertising materials; 

(9) lubricants, repair parts and accessories for motor vehicles; 

(10) inspection bags; 

(11) gloves. 

(e) The lists in (c) and (d) of this Rule are not intended to be exclusive but are for illustrative purposes 
only. If there is any question as to the tax status of any item not on the Usts, it may be submitted to 
the Secretary of Revenue for a determination as to the applicable rate of tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 105-264; 
Eff. February I, 1976; 
Amended Eff. October I, 1991; May I, 1985; May II, 1979; September 30, 1977. 

.1907 SCR.AP TIRE DISPOSAL TAX 

(a) Effective July 1, 1991, G.S. 105-187.16 imposes a privilege tax at the rate of one percent on the 
sales price of each new tire sold at retail by the retailer which replaces the scrap tire disposal fee. The 
one percent privilege tax is also imposed on the sale of each new tire by a retail or wholesale merchant 
to a retail or wholesale merchant for placement on a vehicle offered for sale, lease or rental by the retail 
or wholesale merchant. An excise tax at the rate of one percent is imposed on the cost price of each 
new tire purchased from outside of North Carolina for storage, use, or consumption in this State or for 
placement in this state on a vehicle offered for sale, lease or rental. The defmitions in G.S. 105-164.3 
apply to this /Vrticle, except the term "sale" does not include lease or rental of new tires, but does in- 
clude the amount of any federal excise tax imposed on such tires. G.S. 105-187.18 provides for ex- 
emptions from the taxes to: 

( 1) bicycle tires and other tires for vehicles propelled by human power; and 

(2) recapped tires. 

(b) The exemptions in G.S. 105-164.13 and the refunds allowed in G.S. 105-164.14 do not apply to 
the taxes imposed by this Article. According to G.S. 105-187.17, these taxes are to be collected and 
administered in the same manner as the state sales and use taxes and are to be reported on the Scrap 
Tire Disposal Tax Report, Form E-500G. 



6:13 NORTH CAROLINA REGISTER September 50, 1991 858 



FINAL RULES 



Historj' Sole: Statutory^ Authority G. S. 105-262: 105-264; I30A-309.55; I30A-309.56; 
Eff. October I, 1991. 

SECTION .2000 - SALES AND GIFTS BY EMPLOYERS TO EMPLOYEES OR OTHER 

USERS 



.2001 SALES TO EMPLOYEES 

Sales of tangible personal property by any employer, manufacturer, processor, wholesaler, distributor 
or jobber to his employees or others for use or consumption are subject to the four percent (three 
percent until July 16, 1991) state tax and any applicable local sales or use tax, unless specifically exempt, 
notwithstanding that such sales are infrequent or comprise only a small fraction of the vendor's total 
business, and every employer, manufacturer, processor, wholesaler, distributor or jobber making such 
sales must register with the department and collect and remit the tax due thereon. The fact that any 
such vendor only makes sales to his employees shall in no way relieve him of this requirement. 

History- Xote: Statutory Authority G.S. 105-164.4: 105-164.6: 105-262; 
Eff. Febntary 1. 1976; 
Amended Eff October 1, 1991. 

.2002 GIFTS TO EMPLOYEES 

Gifts of tangible personal property by any employer, manufacturer, processor, wholesaler, distributor 
or jobber to his employees or other persons are subject to the four percent (three percent until July 16, 
1991) state tax and any applicable local sales or use tax, unless the donor paid sales or use tax on the 
sales or purchase price of the donated property at the time he acquired the same. The tax due by reason 
of any such gift shall be paid by the donor and shall be computed on the donor's cost price of the 
property donated, irrespective of whether fabricated, produced, manufactured or processed by the do- 
nor, or acquired elsewhere. 

History Xote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 19''6; 
Amended Eff October 1, 1991. 

SECTION .2100 - ELECTRICITY: PIPED NATURAL GAS: BOTTLED GAS: COAL: COKE: 
FUEL OIL: O.XYGEN: ACETYLENE: HYDROGEN: LIQUEFIED PETROLEU.M GAS AND 

OTHER COMBUSTIBLES 



.2101 rs GENERAL 

(a) Sales of bottled gas. coal, coke, fuel oil. oxygen, acetylene, hydrogen, hquefied petroleum gas or 
other combustibles to users or consumers are subject to the four percent (three percent until July 16, 
1991 ) state tax and any applicable local rate of sales or use tax except those sales exempt from tax under 
the provisions of G.S. 105-164.13 and those sales which are subject to the one percent rate of tax or 
are exempt from tax under the provisions of G.S. 105-164.4. The gross receipts derived by a utility 
from sales of electricity and piped natural gas to users including manufacturing industries and plants 
are subject to the three percent state rate of tax. The gross receipts derived by a utility from sales of 
electricity and piped natural gas are not subject to the local sales or use tax. The gross receipts derived 
from the sale of electricity by a municipahty whose only wholesale supplier of electric power is a federal 
agency and who is required by contract with that federal agency to make payments in lieu of taxes are 
not subject to the three percent state rate of tax. Effective July 1, 1991, sales to a small power pro- 
duction facility of fuel for use by the facihty to generate electricity are exempt from sales or use tax. 
A ''small power production facility" means a facility which: 

(1) produces electric energy solely by the use, as a primary energy' source, of biomass, waste, 
renewable resources, geothermal resources or any combination thereof; and 

(2) has a power production capacity which, together with any other facilities located at the same site 
(as determined by the North Carolina Utilities Commission), is not greater than 80 megawatts. 

(b) The gross receipts derived by a utility from sales of piped natural gas are subject to the three 
percent state rate of tax on and after Januars' 1, 1985. The term "utility," as used in this Rule, means 
piped natural gas companies that are subject to a privilege tax based on gross receipts under G.S. 



859 6:13 NORTH CAROLLVA REGISTER September 30, I99I 



FINAL RULES 



105-1 16. The three percent sales tax is to be added as a separate item to the charges for piped natural 
gas. Gross receipts upon which the tax is due is the total amount for which the piped natural gas is 
sold, including any charges for services that go into the production or delivery of the gas and that are 
a part of the sale vaJued in money, whether paid in money or otherwise, and includes any amount for 
which credit is given to the purchaser by the seller without any deduction on account of the cost of gas 
sold, the cost of materials used, labor or service costs, interest charged, losses or any other expense 
whatsoever. Therefore, all charges for tangible personal property and services provided in the pro- 
duction and delivery of gas to the purchaser are a part of the sale of piped natural gas upon which the 
tax is due notwithstanding that some charges may be billed separately to the customer for the metered 
service. Set forth below are the departmental determinations as to the application of tax to certain 
specific transactions by natural gas utility companies. 

(1) A utility must report receipts from sales of piped natural gas on an accrual basis. The three 
percent sales tax should be separately stated on the bill to each customer. A sale by a utility 
of piped natural gas is considered to accrue when the utility bUls the customer for the sale. The 
three percent sales tax will be due on gross receipts derived from the sale of such gas without 
any deduction therefrom for any franchise tax which is due. Such receipts must be reflected on 
the Utilities and Municipalities Sales Tax Report, Form E-500E, which is to be filed monthly 
on or before the last day of the month following the calendar month in which the tax accrues. 

(2) Service charges to customers when the company first supplies gas under any applicable rate 
schedule are a part of gross receipts from sales of gas subject to the three percent sales tax. 

(3) The amounts actually charged to customers for piped natural gas consumed for the billing pe- 
riod are the amounts on which the three percent sales tax is due and is to be charged 
notwithstanding that the customers may be under equal pay agreements. 

(4) Charges for reconnecting service to customers after service has been terminated for nonpayment 
are a part of gross receipts from sales of piped natural gas subject to the three percent sales tax. 

(5) Sales of piped natural gas to manufacturing industries and plants, commercial laundries, farmers 
and other users for use as a fuel are subject to the three percent sales tax. Sales of piped natural 
gas to a manufacturer which enters into or becomes an ingredient or component part of the 
manufactured product are exempt from sales tax. 

(6) Sales of piped natural gas directly to the United States Government or any agency thereof are 
not subject to sales tax. In order to be a sale to the United States Government, the Government 
or agency involved must make the purchase of piped natural gas and pay directly to the vendor 
the purchase price of such piped natural gas. While a utility's sales directly to the United States 
Government or an agency thereof are exempt from sales tax, a utility should obtain a purchase 
requisition one time from each agency for its records. 

(7) Sales of piped natural gas to registered utility companies for resale are exempt from sales tax 
when such sales are supported by properly completed Certificates of Resale, Form E-590. 

(8) Energy audit amounts charged to customers for a comprehensive energy audit provided by a 
utility are not a part of gross receipts from sales of piped natural gas subject to the three percent 
sales tax. 

(9) Late payment charges billed on a balance that was not paid on the precious month's bill are 
not a part of gross receipts of sales of piped natural gas subject to the three percent sales tax. 

(10) Retum check charges for checks received by a utility in payment of an account and returned 
by the bank because of insufficient funds are not a part of gross receipts from the sale of piped 
natural gas subject to the three percent sales tax. 

(11) Accounts of purchasers representing taxable sales on which the three percent sales tax has been 
paid that are found to be worthless and actually charged off for incomes tax purposes may be 
corresponding periods be deducted from gross sales provided, however, they must be added to 
gross sales if afterwards coUected. 

(12) Local sales taxes are not applicable to those receipts from services subject to the state sales tax 
of three percent, but the local taxes are applicable to receipts from sales and leases of tangible 
personal property subject to the four percent (three percent until July 16, 1991) state rate of tax. 

(c) Effective January 1, 1985, the gross receipts derived by a utility from sales of electricity and piped 
natural gas to manufacturing industries and plants for use in connection with the operation of such 
industries and plants are subject to the three percent state rate of tax. Receipts from the sale of elec- 
tricity by a municipality whose only wholesale supplier of electric power is a federal agency required 
by contract with that federal agency to make payments in lieu of taxes are not subject to the three 
percent state rate of tax. Sales of other fuel to manufacturing industries and plants for use in cormection 
with the operation of such industries and plants other than sales of fuel to be used for residential heating 



6:15 NORTH CAROLINA REGISTER September 50, 1991 860 



FINAL RULES 



purposes are subject to the one percent rate of sales or use tax. Sales of fuel, other than electricity and 
piped natural gas, to manufactunng industries and plants for residential heating purposes are subject 
to the four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 
Sales of coal in its original state are exempt from tax when such sales are made by the producer, or his 
agent, in the capacity of a producer and the coal is delivered to the purchaser directly from the mine. 

History Sole: Statutory Authoritv G.S. 105-164.4; 105-164.6; 105-164.13; 105-262; 
Eff. February 1, 1976; 
Amended Eff. October 1, 1991; May I, 1990; August 1. 1986; February 1, 1986. 

.2103 PROPANE SOLD TO SCHOOLS 

Sales of propane gas to public and private schools for use or consumption are subject to the four 
percent (three percent untU July 16, 1991) state tax and any applicable local sales or use tax. 

Historv Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October I, 1991. 

.2105 A\ LATION FUEL 

Sales of aviation gasoline and other aviation fuel to users or consumers in this state are subject to the 
four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. The 
federal tax on aviation gasoline or other aviation fuels which is levied at the rate of 9. 1 cents per gallon 
by Chapter 32, Section 4081, of the Internal Revenue Code and the federal super fund tax of .35 cents 
per gallon are imposed on gasoline sold by any producer, terminal operator or importer of gasoline and 
should be included in the sales price of aviation gasoline on which North Carolina sales tax is due. 
The federal tax of three cents per gallon on noncommercial aviation gasoline and the federal tax of 14.1 
cents per gallon on certain other liquids sold for use or used for fuel in noncommercial aviation as levied 
by the provisions of Chapter 31, Section 4041, of the Internal Revenue Code, are taxes imposed at the 
retail level and these taxes are not includable in the sales price upon which North Carolina sales tax is 
due. 

Historv S'ote: Statutor\' Authoritv G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1. 1976: 
Amended Eff October 1, 1991; October 1. 1990; January 3, 1984. 

SECTION .2200 FOOD .AND FOOD PRODUCTS FOR HU.\L\N CONSUMPTION 



.2201 rS GENERAL 

(a) All retail sales of food or food products are subject to the four percent (three percent until July 
16, 1991) state tax and any applicable local sales or use tax unless there is an exemption or exclusion 
provided in the statutes. 

(b) The following sales are excluded from the tax as sales for resale: 

(1) sales of food products to registered merchants for resale, including sales to registered restaurants, 
if such sales are supported by properly executed certificates of resale, Form E-590; 

(2) sales of food products to schools if such food products are to be sold within school buUdings to 
school children in connection with the school lunchroom program, and sales of food products 
to state or private educational institutions, or student organizations thereof, if such food pro- 
ducts are to be served to students in dirung rooms regularly operated by such institutions or 
organizations. 

(c) The following sales are exempt from the tax under the provisions of G.S. 105-164.13: 

(1) sales of products of farms, forests and waters if sold in their original or unmanufactured state 
by the producer in his capacity as the producer and not as a retail merchant; Fish and seafoods 
shall likewise be exempt when sold by the fishermen; 

(2) sales of lunches to school children when such sales are made within school buildings and are not 
for profit; 

(3) sales of meals and food products to students in dining rooms regularly operated by state or pri- 
vate educational institutions, or student organizations thereof; 



861 6:13 NORTH CAROLINA REGISTER September iO, 1991 



FINAL RULES 



(4) Effective October 1, 1985, food and other items lawfully purchased with coupons issued under 
the Food Stamp Program, 7 L'.S.C. Subsection 51, and supplemental foods lawfully purchased 
with a food instrument issued under the Special Supplemental Food Program, 42 U.S.C. Sub- 
section 1786. Under the Food Stamp Program, "food" means any food or food product for 
human consumption and also includes seeds and plants for use in home gardens to produce food 
for consumption by food stamp households. Items which may not be purchased with food 
stamps include alcohohc beverages, tobacco, hot foods ready to eat and foods intended to be 
heated in the store, lunch counter items or foods to be eaten in the store, vitamins or medicines, 
pet foods and any nonfood items. The supplemental foods list currently includes whole, skim, 
evaporated and nonfat milk; specific cereals; certain juices; cheese; eggs; dry beans and peas; dry 
infant cereal and infant juice; and other special formulas. The items on the supplemental food 
list are subject to change; 

(5) effective October 1, 1990, sales of food by a church or religious organization not operated for 
profit are exempt from sales and use taxes when the proceeds of the sales ar& actually used for 
religious activities. 

(d) Every retailer shall keep and preserve suitable records of gross income, gross receipts and/or gross 
receipts of sales of such business and such other books or accounts as may be necessary to determine 
the amount of tax for which he is liable under the statute. Retailers shall keep separate records dis- 
closing sales of tangible personal property taxable under the statute and sales transactions not taxable 
because exempt under G.S. 105-164.13 or elsewhere excluded from taxation. Unless such records shall 
be kept, the exemptions and exclusions provided by the statute shall not be allowed and it shall be the 
duty of the secretary or her authorized agents to assess a tax upon gross sales at the rate levied upon 
retail sales; and if records are not kept disclosing gross sales, it shall be shall be the duty of the secretary 
to assess tax based upon the best information available. 

(e) Since the sales defmed in Paragraphs (c)(2) and (c)(3) of this Rule are tax exempt, the schools, 
institutions and organizations making such sales will not on account of such sales be required to register 
with the department and, therefore, unless otherwise required to register by reason of making other sales 
or purchases subject to the sales or use tax, cannot furnish certificates of resale. Form E-590, to their 
supphers. Thus, when making purchases of food products to be sold, such nonregistered schools, in- 
stitutions and organizations must furnish their suppliers with information to the effect that the food 
products purchased are to be sold in connection with their school lunchroom programs or their dining 
rooms, and the suppliers must enter such information on their records and on the sales invoices. 
Otherwise, such transactions may be subject to the tax. Registered schools, institutions and organiza- 
tions should furnish properly executed certificates of resale. Form E-590, where applicable. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.5; 105-164.13; 105-262; 
Eff. February 1, 1976; 
Amended Eff. October 1, 1991; February 1. 19S6; May II, 1979. 

.2202 DISPOSABLE LLTsCHROOM SUPPLIES 

Sales to school lunchrooms and dining rooms of disposable items such as paper cups, paper napkins 
and drinking straws which actually contain or otherwise accompany the sale or ser\ ice of the food and 
which are actually used by the students in consuming the meals are exempt from the tax. This ex- 
emption does not include brooms, mops, soaps, chinaware, silverware and other equipment or suppUes, 
and sales of this nature are subject to the four percent (three percent until July 16, 1991) state tax and 
any applicable local sales or use tax. 

History Note; Statutory Authority G.S. 105-164.4; 105-164.5; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.2203 E.MPLOVEES' ME.ALS 

Prepared meals furnished to employees in restaurants, cafes, cafeterias, hotel dining rooms, drug stores 
or any other similar places whether for the convenience of the employer or as a part of the employee's 
compensation are subject to the four percent (three percent until July 16, 1991) state tax and any ap- 
plicable local sales or use tax to be computed on the cost price of the food products used in furnishing 
such meals; however, sales of meals to employees are subject to tax on the sales price thereof. 



History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 



6:13 NORTH CAROLINA REGISTER September 30, 1991 862 



FINAL RULES 



Eff. February I. 1976; 

Amended Eff. October I, 1991; February I, 1986. 

.2204 MEALS ON TRAINS: PLANES: ETC. 

Sales of prepared foods or meals by railroads, pullman cars, steamships, airlines or other transporta- 
tion company diners, while within this state, are subject to the four percent (three percent until July 
16. 1991 ) state tax and any applicable local sales or use tax. 

History Sote: Statutory Authority G.S. 105-164.4; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.2205 CATERERS 

All charges by persons engaged in the catering business that are connected with the furnishing, pre- 
paring or serving of meals, foods, and other tangible personal property to users or consumers are subject 
to the four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 
If such persons perform other services that are not a part of the charges for the furnishing, preparing 
or senmg of meals, foods, and other tangible personal property, the charges for such services rendered 
are exempt from tax provided such charges are separately stated from the charges for the tangible per- 
sonal property on the invoice given to the customer at the time of the sale and in the vendor's records; 
otherwise, the total amount is subject to the tax. 

History Sote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991; July 5, 19S0. 

.2207 FOOD SER\ ICE SUPPLIES 

Paper doilies, paper place mats, paper coasters, paper napkins, drinking straws and similar disposable 
items which become a part of the sale or service of food and are expended by customers Ln consuming 
their meals are exempt from sales or use tax when sold to school lunchrooms, restaurants, cafes, cafe- 
terias and other such places of business selling and serving prepared meals and foods. Sales of plastic 
or cloth place mats, cork, plastic or china coasters, china, silverware, cloth napkins, tablecloths or other 
reusable items to restaurants, cafes, cafeterias and other similar places of business for use in serving 
meals and not for resale are ta.xable at the state rate of four percent (three percent until July 16, 1991) 
state tax and any applicable local sales or use tax rate. Sales of patty paper, paper containers, etc., to 
restaurants for use in storing food are subject to the four percent (three percent until July 16, 1991) state 
tax and any applicable local sales or use tax. 

History \ote: Statuton^ Authority G.S. 105-164.4; 105-164.5; 105-262; 
Eff Februar\- 1. 1976: 
Amended Eff October 1. 1991; July 5, 1980. 

.2212 SEAEOODS 

A person who purchases fish and sells them at retail is liable for the four percent (three percent until 
July 16. 1991 1 state tax and any applicable local sales or use tax on such sales. Sales offish and seafood 
are exempt when sold in their original or unmanufactured state by the fisherman in his capacity as a 
fisherman. 

Histoi-y Sote: Statuton.- Authority G.S. 105-164.4: 105-164.13; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

SECTION .2400 - \ ETERINARIANS 



.2401 SALES TO VETERINARIANS 

(a) Veterinarians are engaged in rendering professional ser\'ices and are the users or consumers of 
medicines or drugs and other tangible personal property which they purchase for use in administering 
treatment to animals. Purchases by veterinarians of medicines or drugs for use in the treatment of pets, 



863 6:13 NORTH CAROLINA REGISTER September 30, I99I 



FINAL RULES 



such as birds, dogs and cats, are subject to sales or four percent (three percent until July 16, 1991) state 
tax and any applicable local sales or use tax notwithstanding such medicines and drugs may be of the 
type usually sold on the prescription of a veterinarian. Veterinarians should remit the tax due on such 
purchases to their suppliers who collect and remit North Carolina sales and/or use taxes. When such 
purchases are made from out-of-state suppliers who do not collect and remit the applicable sales or use 
tax, the veterinarians are liable for remitting the use tax due thereon directly to the North Carolina 
Department of Revenue. Purchases and sales by veterinarians of medicines and drugs for use in the 
treatment of livestock and poultry, including cattle, horses, mules, sheep, chickens, turkeys and other 
domestic animals usually found on a farm, and other animals or poultr>' held or produced for com- 
mercial purposes are exempt from sales or use tax. 

(b) Veterinarians who make purchases of medicines or drugs for use in the treatment of hvestock, 
poultr}' and pets, and by reason of the multiple uses to be made of the medicines or drugs cannot de- 
termine the application of tax thereto until they are used may, in connection with such purchases, fur- 
nish Veterinarian's Certificate, Form E-567, to their vendors and assume hability for payment of the 
applicable tax to the Secretary of Revenue on that portion which is used in the treatment of pets. 
Veterinarians making purchases pursuant to a Veterinarian's Certificate, Form E-567, must register with 
the department for the purpose of remitting the use tax due on that portion of such medicines and drugs 
used in treating pets. 

(c) Sales to veterinarians of medical supplies, including such items as cotton, gauze, adhesive tape, 
bandages and other dressings and medical instruments and equipment, such as knives, needles, scissors, 
microscopes, x-ray machines and other laboratory equipment used for testing and diagnosis, and for the 
prevention, treatment or cure of diseases in animals are subject to the four percent (three percent until 
July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1, 1976; 
Amended Eff. October 1, 1991; August 1, 1986; May 11, 1979. 

SECTION .2500 - FURNITURE AND STOR.4GE WAREHOUSEMEN 



.2502 MOVING AND PACKING MATERIALS 

Crating, boxing, packaging and packing materials purchased by warehousemen to be used by them in 
moving, storing, packing or shipping tangible personal property are subject to the four percent (three 
percent until July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1, 1976: 
Amended Eff. October 1, 1991. 

.2503 SECONDHAND FURNITURE 

Except as provided in 17 NCAC 7B .2504, sales by warehousemen of secondhand furniture or other 
tangible personal property to which they have acquired title are subject to the four percent (three per- 
cent until July 16, 1991) state tax and any applicable local sales or use tax and warehousemen making 
such sales must register with the department and collect and remit the tax due on such sales. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1, 1976; 
Amended Eff October 1. 1991. 

SECTION .2600 - LIABILITY OF CONTRACTORS: USE TAX ON EQUIPMENT BROUGHT 

rsTO STATE: BUILDING MATERIALS 



.2601 USE TAX ON EQUIPMENT BROUGHT ENTO STATE 

(a) A use tax is levied at the applicable rates upon the storage or use of all motor vehicles, machines, 
machinery, tools or other equipment brought, imported or caused to be brought into this state for use 
in constructing, building or repairing any building, highway, street, sidewalk, bridge, cuh'ert, sewer or 
water system, drainage or dredging system, railway system, reser\'oir or dam, hydraulic or power plant. 



6:U NORTH CAROLINA REGISTER September 30, 1991 864 



FINAL RULES 



transmission line, tower, dock, wharf, excavation, grading, or other improvement or structure, or any 
part thereof. The state rate of tax is four percent (three percent until July 16, 1991) and the local rate 
of tax is two percent on all tangible personal property unless it is exempt from tax or subject to a lesser 
rate of tax by statute. Prior to October 1, 1989, the state rate of tax is two percent on motor vehicles 
with a maximum tax of three hundred dollars ($300.00) applicable to each vehicle. Effective October 
1, 1989, the state rate of tax of four percent (three percent until July 16, 1991) and the local rate of tax 
of two percent are applicable to motor vehicles brought, imported or caused to be imported into this 
state for the use or purposes described in this Paragraph and the maximum tax is not applicable thereto. 
The use in this state of any motor vehicle, machine or machinery previously purchased at retail for use 
in another .state and actually placed into substantial use in another state before being brought, imported 
or caused to be brought into this state by the owner thereof for use in constructing or repairing its own 
buildings, structures or other property, shall not be subject to the tax. 

(b) 1 he tax shall be computed on the basis of such proportion of the original purchase price of such 
property as the duration of time of use in this state bears to the total useful life thereof. For the pur- 
poses of this Rule, the word use shall mean and include use, storage, consumption and stand-by time 
occasioned by weather conditions, controversies or other causes, it being the intention of this Rule that 
the tax shall be computed upon the basis of the relative time each item of equipment is in this state 
rather than upon the basis of actual use. 

(c) Before any property subject to the use tax is brought into this state for use as provided above, the 
owner, or, il~ the property is leased, the lessee shall register with the sales and use tax division of the 
North Carolina Department of Revenue, .\fter registering, the taxpayer shall file monthly reports on 
forms furnished by the Secretary of Revenue reporting such property brought, imported or caused to 
be brought into this state during the preceding calendar month, together with remittance of the amount 
of tax due. Such reports are to be fded on or before the 15th of the month following the month in 
which such property was brought into this state. 

Monthly reports fded pursuant to this Rule shall be accompanied by a schedule listing the property 
included in the report and showing the original cost price, duration of time of use in tliis state, total 
useful life, and the taxable amount for each item. 

The taxable amount on each item of property shall be computed by multiplying the original purchase 
price by the duration of time of use in this state and di\iding the result by the total useful life, expressed 
in the same units of time as the duration of time of use in this state, as follows: 

Original purchase price x Duration 

of time of use in this state = Taxable amount 

Total useful life 

In the absence of satisfactory evidence as to the period of use intended in this state, it will be presumed 
that such property wlU remain in this state for the remainder of its useful life, which shall be determined 
in accordance with the experiences and practices of the building and construction trades. /\ny taxpayer 
who claims a greater estimated useful life for a given piece of equipment than that suggested by the 
Bureau of Internal Revenue in the then current bulletin F for depreciation purposes, or any then cur- 
rent bulletin replacing said bulletin F, shall set forth his reasons therefor. 

Effective October 1, 1989, a credit is allowed against the tax imposed on the use of property in this state 
for any retail sales or use tax due and properly paid on the property to another state. A similar credit 
is also allowed against the local use taxes imposed in this state for any local retail sales or use tax paid 
on the property to a locality in another state. The amount of the credit allowed is computed by di- 
viding the total useful life of the property into the duration of time of use in this state, expressed in the 
same units of time as the useful Ufe of the property, and multiplying the result by the state or local sales 
or use tax paid on the property as follows: 

Duration of time of use in state Sales or Use State or 

Total Useful Life x Tax Paid = Local Credit 

No credit is allowed, however, if the state, or the locality in another state, to which a retail sales or use 
tax was paid does not allow a similar credit or grant an exemption for property brought into that state 
or locality from this state. No credit is allowed against the tax imposed on the use of property brought, 
imported or caused to be imported into this state prior to October 1, 1989, for any retail sales or use 
tax paid on the property to another state or to a locality in another state. 



865 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



(d) When a taxpayer determines that he will have no further hability for use tax, he shall so advise 
the department at the time his fmal monthly report is filed. 

(e) Nothing in this Rule shall be so construed as to relieve any taxpayer of liability for sales or use 
tax levied on sales or purchases of tangible personal property for use, storage or consumption in this 
state under other provisions of the Sales and Use Tax Article of the Revenue Act. In addition to the 
use tax as provided in this Rule, taxpayers are liable for sales or use tax on all other tangible personal 
property purchased for use, storage or consumption in this state. 

History Note: Statutory Authority G.S. I05-I64.6; 105-262; 
■ . Eff. February I, 1976: 

Amended Eff. October I, 1991; May I, 1990; December I. 1984; January 1. 1982. 

.2602 CONTRACTORS: SUBCONTRACTORS: RETAILER CONTRACTORS 

(a) Contractors are deemed to be consumers of tangible personal property which they use in fulfilling 
contracts and, as such, are hable for payment of sales or use tax on such property. When a contractor 
or a subcontractor makes taxable purchases of tangible personal property from suppliers outside this 
State who charge North Carolina sales or use tax thereon or from suppliers in this State, they should 
remit the tax on such purchases to their suppliers. When a contractor or subcontractor makes taxable 
purchases of tangible personal property for use in this State from a supplier outside this State who does 
not collect North Carolina sales or use tax thereon, such contractor or subcontractor must remit the 
tax directly to the department. Where the purchaser is a contractor, the contractor and owner shall 
be jointly and severally liable for said tax, but the liability of the owner shall be deemed satisfied if be- 
fore fmal settlement between them the contractor furnishes to the owner an affidavit certifying that said 
tax has been paid. Effective October 1, 1980, where the purchaser is a subcontractor, the contractor 
and subcontractor shall be jointly and severally liable for said tax, but the liability of the contractor shall 
be deemed satisfied if before fmal settlement between them the subcontractor furnishes the contractor 
an affidavit certifying that said tax has been paid. The liability of the subcontractor for such tax does 
not extend to the property owner. 

(b) The term retailer-contractor shall mean any person who engages in the business of selling building 
materials, supplies, equipment, and fi.xtures at retail and, in addition to such business, enters into con- 
tracts for constructing, building, erecting, altering or repairing buUdings or other structures, and for the 
installation of equipment and fixtures to buildings and, in the performance of such contracts, consumes 
or uses such materials or merchandise. When a retailer-contractor as herein defined makes purchases 
of the above named tangible personal property, a part of which he wiU use in performing contracts and 
a part of which he wUl sell at retail, the retailer-contractor should furnish his supplier a properly exe- 
cuted certificate of resale. The supplier should keep the executed certificate for his records as his au- 
thority for not charging tax on the transaction. The retailer-contractor then becomes liable for 
remitting, directly to the department, tax on the sales price of any tangible personal property sold at 
retail, and tax on the cost price of any tangible personal property used in the performance of a contract. 

(c) Contractors are required to remit use tax at the applicable rate on the storage or use of motor 
vehicles, machines, machinery, tools and other equipment brought into this state for use in construction 
or repair work. The tax is to be applied and computed in the manner set forth in 17 NCAC 7B .2601. 

(d) Effective July 1, 1977, sales to contractors and subcontractors purchasing mill machinery or rrull 
machinery parts and accessories for use by them in the performance of contracts with manufacturing 
industries and plants and sales to subcontractors purchasing mill machinery or mill machinery parts and 
accessories for use by them in the performance of contracts encompassed in such contracts with man- 
ufacturing industries and plants are subject to the one percent rate of tax, with a maximum tax of eighty 
dollars ($80.00) per article where applicable. Such mill machinery or mill machinery parts and acces- 
sories must be for use by a manufacturing industry or plant in the production process, as the term 
"production" is defmed in 17 NCAC 7B .0202(a)(1), to qualify for the one percent rate of tax with a 
maximum tax of eighty dollars ($80.00) per article when purchased by such contractors or subcon- 
tractors. Contractors and subcontractors may obtain Contractor's and Subcontractor's Certificate, 
Form E-580, from the Sales and Use Tax Division, North Carolina Department of Revenue, to be 
executed by them and furnished to their vendors in connection with such purchases as the vendor's 
authority to apply the one percent rate of tax thereto. 

(e) Construction materials purchased or sold on and after July 16, 1991, (the effective date of the 
increase in the state tax rate to four percent) to fulfill a lump-sum or unit price contract entered into 
or awarded before July 16, 1991, or entered into or awarded pursuant to a bid made before July 16, 
1991, will continue to be taxable at the three percent state rate of tax and the local tax of two percent. 



6:15 NORTH CAROLINA REGISTER September 30, 1991 S66 



FINAL RULES 



Form E-589, Affidavit to Exempt Contractors From the Additional One Percent State Tax Effective 
July 16, 1991, must be executed by the contractor or subcontractor to obtain the three percent state 
rate. 

History Note: Statutory Authority G.S. 105-164.4; I05-I64.6; 105-262; 105-264; 
Eff. February I, 1976; 
Amended Eff- October I, 1991: February 8, 1981; May II, 1979; September 30, 1977. 

.2603 V\ EIGH HOPPERS SOLD TO CONTRACTORS 

Sales of asphalt plants, concrete plants, weigh hoppers or other equipment to contractors who produce 
concrete or asphalt for use in fulfilling their contracts are taxable at the four percent (three percent until 
July 16, 1991) state tax and any applicable local sales or use tax, and no maximum tax is apphcable 
thereto. 

History Note: Statutory Authority G.S. 105-/64.4; 105-164.6; 105-262; 
Eff February I. 1976; 
Amended Eff October I. 1991; December 1, 1984; July 5, 1980. 

.2604 SAND: STONE SOLD TO CONTRACTORS 

Sales of sand, dirt, and stone to contractors or other users or consumers or to nonregistered merchants 
are subject to the four percent (three percent until July 16, 1991) state tax and any applicable local sales 
or use tax unless such property is sold in its original or unmanufactured state by the producer in his 
capacity as a producer. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6: 105-164.13; 105-262; 
Eff February 1, 1976; 
Amended Eff October I. 1991. 

.2605 SANDBLAST SAND SOLD TO CONTRACTORS 

Sales of sandblast sand to contractors for use in the performance of contracts to clean ships, buildings, 
etc. are subject to the four percent (three percent until July 16, 1991) state tax and any applicable local 
sales or use tax. 

History Note: Statutory Authority G.S. 105-/64.4; 105-/64.6; 105-262; 
Eff. February 1 , 1976; 
Amended Eff October 1. 1991. 

.2606 PRE FABRICATED BUILDINGS: CONTRACTORS 

Sales of pre-fabricated buildings to contractors, buUders, or other users or consumers in this state are 
subject to the four percent (three percent untU July 16, 1991) state tax and any applicable local sales 
or use tax. Manufacturers of pre-fabricated buildings entering into performance contracts for the 
erection of buildings are liable for payment of the four percent (three percent untU July 16, 1991) state 
tax and any apphcable local sales or use tax on the cost price of tangible personal property used in the 
performance of the contract. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1. 1976; 
Amended Eff October I. 199/; October 1, 1990. 

2601 SUBCONTRACTORS 

Subcontractors are liable for payment of the four percent (three percent until July 16, 1991) state tax 
and any apphcable local sales or use tax on the ta.xable tangible personal property which they purchase 
for use in fulfilling their subcontracts unless such property is subject to a one percent rate of tax under 
the provisions of G.S. 105-164.4(l)(h). 

History Note: Statutory' Authority G.S. /05-/64.4; /05-/64.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991: July 5, 19S0. 



867 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



.2608 PLUMBING: HEATCSG CONTRACTORS: PURCHASES 

(a) Construction materials purchased or sold on and after July 16, 1991, (the effective date of the 
increase in the state tax rate to four percent) to fulfill a lump-sum or unit price contract entered into 
or awarded before July 16, 1991, or entered into or awarded pursuant to a bid made before July 16, 
1991, will continue to be taxable at the three percent state rate of tax and the local tax of two percent. 
Form E-589, Affidavit to Exempt Contractors From the Additional One Percent State Tax Effective 
July 16, 1991, must be executed by the contractor or subcontractor to obtain the three percent state 
rate. 

(b) Contractors are deemed to be the users or consumers of buUding materials and other tangible 
personal property which they use in the performance of lump-sum, cost-plus or time and material 
contracts to fumish and install a plumbing, heating, air conditioning or electrical system or which they 
use in making repairs, alterations or additions to an existing system. Contractors are therefore liable 
for payment of tax on their purchases of such property. The tax paid on such purchases is a part of 
the cost of the property and may be recovered in the contract price; however, the tax shall not be 
charged as a separate item to the property owner. Contractors must also pay the tax on purchases of 
property which they resell unless such contractors have been classified by the Department of Revenue 
as retailer-contractors and have been authorized to use the certificate of resale. Form E-590. The tax 
due on all purchases by contractors should be paid to the suppliers unless the purchases are made from 
out-of-state vendors who do not collect North Carolina sales or use tax. Contractors must remit the 
tax on such out-of-state purchases directly to the Department of Revenue. 

History Note: Statutory Authority G.S. / 05-/ 64. 4; 1 05- 1 64. 6; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I. 1991. 

.2611 BUILDING MATERIALS 

(a) AH building materials, supplies, fixtures and equipment of every kind and description which be- 
come a part of or are annexed to any building or other structure are subject to the four percent (three 
percent untU July 16, 1991) state tax and any applicable local sales or use tax. Vendors of such items 
are required to register and to collect and remit the tax on their sales to contractors and other users or 
consumers. 

(b) If the contractor purchases from a vendor outside the state any buUding materials, supphes, fix- 
tures or equipment for use in the construction, erection, alteration or repair of a building or other 
structure in this state and the vendor does not collect the tax thereon, such contractor must remit the 
use tax directly to the department. The Sales and Use Tax Law provides that in such cases the tax is 
a joint liability of the contractor and the owner. The liability of the owner will be satisfied if he obtains 
from the contractor before settlement an affidavit that the tax due has been paid. 

(c) Construction materials purchased or sold on and after July 16, 1991, (the effective date of the 
increase in the state tax rate to four percent) to fulfill a lump-sum or unit price contract entered into 
or awarded before July 16, 1991, or entered into or awarded pursuant to a bid made before July 16, 
1991, win continue to be taxable at the three percent state rate of tax and the local tax of two percent. 
Form E-589, Affidavit to Exempt Contractors From the Additional One Percent State Tax Effective 
July 16, 1991, must be executed by the contractor or subcontractor to obtain the three percent state 
rate. 

(d) Effective July 1, 1977, sales to contractors and subcontractors purchasing miU machinery or miU 
machinery parts and accessories for use by them in the performance of contracts with manufacturing 
industries and plants and sales to subcontractors purchasing mill machinery or mill machinery parts and 
accessories for use by them in the performance of contracts encompassed in such contracts with man- 
ufacturing industries and plants are subject to the one percent rate of tax, with a maximum tax of eighty 
dollars ($80.00) per article where applicable. Such null machinery' or miU machinery' parts and acces- 
sories must be for use by a manufacturing industry' or plant in the production process, as the term 
"production" is defmed in 17 NCAC 7B .0202(a)(1), to qualify for the one percent rate of tax with a 
maximum tax of eighty dollars ($80.00) per article when purchased by such contractors or subcon- 
tractors. Contractors and subcontractors may obtain Contractor's and Subcontractor's Certificate, 
Form E-580, from the Sales and Use Tax Division, North Carolina Department of Revenue, to be 
executed by them and furnished to their vendors in connection with such purchases as the vendor's 
authority to apply the one percent rate of tax thereto. 

(e) Effective August 1, 1986, sales to commercial livestock and poultry farmers of materials to be used 
exclusively in the construction, repair or improvement of any enclosure or structure specifically de- 



6:13 NORTH CAROLINA REGISTER September 30, I99I S68 



FINAL RULES 



signed, constructed, and used for commercial purposes for housing, raising, or feeding livestock and 
poultry or for housing equipment necessar>' for these activities, including work space used solely for 
these commercial activities, are exempt from sales and use taxes. Likewise, sales of materials for the 
above described uses to contractors performing contracts with commercial livestock and poultry farmers 
and subcontractors f>erforming contracts with general contractors who have contracts with commercial 
livestock and poultrv' farmers shall be exempt. The exemption from tax extends only to building ma- 
terials, as such, which are used in the construction, repair or improvement of such enclosures or 
structures and which become a part of such enclosures or structures. The exemption does not extend 
to sales of equipment and machinery used to equip such enclosures or structures prior to September 
1, 1987. Effective September 1, 1987, the exemption was expanded to include sales of commercially 
manufactured swine, livestock, and poultr>' facilities to be used for commercial purposes for housing, 
raising, or feeding of swine, livestock, or poultry or for housing equipment necessar>' for these com- 
mercial activities; buUding materials, supplies, fixtures, and equipment to be used in the construction, 
repair, or improvement and that become a part of an enclosure or structure specifically designed, con- 
structed and used for such above commercial purposes; and commercially manufactured swine. Live- 
stock, and poultry equipment, parts and accessories therefor placed or installed in or affixed to such 
facilities, enclosure, or structures. 

(f) For the puipose of this Rule, the words "swine, livestock and poultr>'" include swine, cattle, 
horses, mules, sheep, chickens, turkeys and other similar domestic animals and fowl usually held or 
produced on a farm for commercial purposes. The word "commercial" shall mean "held or produced 
for income or profit." It does not include one who merely produces swine, livestock or poultry for 
one's personal use or consumption and not for sale. Commercial swine. Livestock or poultry farmers, 
and contractors performing contracts with commercial swine, livestock or poultry farmers and sub- 
contractors performing contracts with general contractors who contract with commercial swine. Live- 
stock or poultry farmers may obtain Commercial Swine, Livestock and Poultry Farmers' Certificate, 
Form E-599S, from the Sales and Use Tax Division, North Carolina Department of Revenue, or any 
of its field offices, to be executed by them and furnished to their vendors in connection with such pur- 
chases as the vendor's authority to exempt such purchases from sales and use taxes. 

Histon .\ote: Statutory Authority G.S. 105-164.4; 105-164.6: 105-262; 105-264; 
Eff. February 1, 1976: 
Amended Eff. October I, 1991; February I, 1988; May II. 1979; September 30, 1977. 

SECTION .2700 - DENTISTS: DENTAL LABORATORIES AND DENTAL SUPPLY HOUSES 



.2701 SALES TO DENTISTS AND ORTHODONTISTS 

Dentists and orthodontists are deemed to be the users or consumers of tangible personal property 
which they purchase for use in rendering professional services. With the exception of false teeth and 
orthopedic appliances which are specifically exempt from tax, all sales of tangible personal property to 
dentists and orthodontists, including dental supplies, equipment, furnishings and other property, such 
as materials which dentists fabricate into false teeth, are subject to the four percent (three percent until 
July 16, 1991) state tax and any applicable local sales or use tax. The term "false teeth" includes 
dentures and artificial restoration of teeth; however, as stated in this Rule, the exemption for false 4eeth 
does not apply to sales of materials to dentists which they use in fabricating false teeth. The term 
"orthopedic appliances" includes headgear, bows, neckstraps, wires, bands, brackets, rubber bands and 
jackscrews when such items are purchased by orthodontists to be assembled into various types of ap- 
pliances to be wom on the person of the owner or user and other orthopedic appliances when the same 
are designed to be wom on the person of the owner or user. 

Historv .\ote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-164.13; 105-262; 
Eff February' I, 1976; 
Amended Eff October I, 1991; January 3, 1984; November 1, 1982. 

.2702 SALES TO DENTAL LABOR.\TORIES 

(a) Sales to dental laboratories of tangible personal property which becomes a component part of false 
teeth, dentures or artificial restoration of teeth being fabricated by such laboratories are not subject to 
sales or use tax. 



869 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



(b) Sales to dental laboratories of machinery and equipment, and accessories thereto for use directly 
in the fabricating of false teeth are subject to the one percent rate of sales or use tax with a maximum 
tax of eighty dollars ($80.00) per article. 

(c) Sales to dental laboratories of tangible personal property which does not become a component 
part of false teeth, or which is not used directly in the fabricating of the false teeth are subject to the four 
percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-164.13; 105-262; 105-264; 
Eff. February I, 1976; 
Amended Eff. October I. 1991; January I, 1982; May II, 1979; September 30, 1977. 

SECTION .2800 - FLORISTS: NURSERYMEN: GREENHOUSE OPERATORS AND 

EARMERS 



.2801 rv GENERAL 

(a) Retail sales of wreaths, bouquets and similar items are subject to the four percent (three percent 
until July 16, 1991) state tax and any applicable local sales or use tax. 

(b) Retail sales of flowers, potted plants, shrubbery and similar nursery stock and retail sales of fruits, 
vegetables and other farm products are subject to the four percent (three percent until July 16, 1991) 
state tax and any applicable local sales or use tax unless the product in question is a product of the farm 
and is sold in its original state by the producer of the product who is not primarily a retail merchant 
at the location where the product is sold. 

(c) For the purpose of the exemption afforded by G.S. 105-164.13(4.2), nurserymen and greenhouse 
operators are considered to be farmers. Nursery stock which is not sold during the season in which it 
was purchased by the nurserymen, greenhouse operators and other farmers but is retained until the next 
season and growth is added thereto by virtue of such retention is considered to be a product of the farm 
and is exempt from sales and use taxes when sold by such nurserymen, greenhouse operators or farmers 
who are not selling primarily as retail merchants. 

(d) Nurserymen, greenhouse operators and other types of farmers that make retail sales of farm pro- 
ducts that they have produced which are in their original state are not Uable for coUecting and remitting 
sales tax on these sales unless they are selling primarily in their capacity as retail merchants. Such 
vendors are selling primarily as producers when the total dollar sales volume of their produced farm 
products in the original state regularly exceeds fifty percent of the total doUar sales volume of their 
purchased products and their produced products. Such vendors are selHng primarily in their capacity 
as retail merchants when their total doUar sales volume of purchased products regularly exceeds fifty 
percent of the total dollar sales volume of their purchased and produced products. Such classification 
shall remain in effect until either category of sales on a regular basis has changed to another principal 
type. If such producer-vendors operate more than one location, the preceding is applicable to the total 
dollar sales volume of each location separately. The total doUar sales volume to be used in determining 
the classification of "producer" or "retail merchant" shall include all sales of tangible personal property 
without regard to any items or sales that might otherwise be exempt from tax by the Sales and Use 
Tax Statutes. 

(e) If such vendors are not classified primarily as retail merchants on the basis of the total doUar sales 
volume, sales of their produced products in the original state are exempt from tax; however, retail sales 
of any farm products or any other taxable merchandise acquired by purchase are subject to any appli- 
cable tax. If such vendors are classified primarily as retail merchants on the basis of the total dollar sales 
volume, they shall be liable for tax accordingly; i.e., all retail sales of both types of products shall be 
subject to the tax unless specific sales are statutorily exempt from tax. 

(f) When vendors make sales of farm products produced by them and products acquired by purchase, 
separate records must be maintained of sales of products produced by them. Records of purchased 
products, as weU as sales thereof, must be kept and maintained in a manner that can be accurately and 
conveniently checked by the agents of the Secretary of Revenue; otherwise, all sales are subject to the 
tax. 

(g) Producers making taxable sales must register with the Department of Revenue for the purpose 
of coUecting and remitting the tax due thereon. 

(h) When nurserymen, greenhouse operators, florists or other persons make taxable sales of shrub- 
bery, young trees or similar items, and as a part of the transaction transplant them to the land of the 
purchaser for a lump sum or a flat rate, the entire amount of the transaction is subject to the four 



6:13 NORTH CAROLINA REGISTER September 30, I99I S70 



FINAL RULES 



percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax unless such 
vendors segregate on the invoice that portion of the charge which is for the property sold and that 
portion of the charge which is for transplanting. 

(i) For the purpose of the exemption afforded by G.S. 105-164.13(4.2), nurserymen and greenhouse 
operators are considered to be farmers and; therefore, the fact that they may be selling tangible personal 
property primarily as a retailer and not as a producer does not preclude certain of their purchases of 
tangible personal property for use from the one percent state rate of tax with a maximum tax of eighty 
dollars ($80.00) per article levied pursuant to G.S. 105-164.4(l)(g). G.S. 105-164.4(l)g levies the above 
state rate of tax on sales to farmers of machines and machiner>' and parts therefor and accessories 
thereto for use by them in planting, cultivating, hanesting or curing farm crops. Regulation 17 NCAC 
7B .1101 provides additional information regarding the above {tvy. 

(j) Effective September 1, 1990, G.S. 105-164.13(6) was repealed remo\mg the exemption from tax 
for retail sales of ice. G.S. I05-164.13(4b) was rewritten to add an exemption for ice sold to be used 
to preserve agricultural, aquacultural and commercial fishery products until the products are sold at 
retail. Sales of ice for resale continue to be exempt from tax. 

History S'ote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-164.13; 105-262; 
Eff. February I. 1976; 
Amended Eff. October 1. 1991; March I, 19S7; June I, 1985; January I, 1982. 

.2802 FLORISTS' TELEGR.APHIC DELH ERV .\SSOCLATIONS 

The tax due on transactions conducted through a florists' telegraphic delivery association shall be 
collected and remitted to the department pursuant to the foUowing rules: 

( 1) On all orders accepted by a florist within North Carolina and telegraphed to another florist within 
or without North Carolina for deliven." within or without North Carolina, the florist initially ac- 
cepting the order must collect and remit to the department the four percent (three percent until 
July 16. 1991) state tax and any applicable local sales or use tax on the total sales price. Service 
charges and telephone or telegraph charges to customers in connection with such orders are exempt 
from tax provided the charges are separately stated in the vendor's records and on the invoice given 
to the customer at the time of the sale; otherwise, the total sum received from the customer who 
placed the order is subject to tax. 

(2) A North Carolina florist recei\ing telegraphic orders from other florists within or without North 
Carolina for dehver\' within or without North Carolina is not liable for any tax on the receipts 
which he den\'es from such transactions. 



Histor\- Sote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1. 1976; 
Amended Eff October 1. 1991; March I, 1987. 

SECTION .2900 - \ ENDING MACHINES 



.2902 SALES OF \ ENDFSG MACHINES 

Sales of vending machines to any person for use are subject to the four percent (three percent until 
July 16, 1991) state tax and any applicable local sales or use tax. The lease or rental of vending ma- 
chines to users are subject to the four percent (three percent until July 16, 1991) state tax and any ap- 
plicable local sales or use tax. Sales of vendmg machines to registered merchants for leasing purposes 
or for the purpose of resale are not subject to the tax \shen supported by properly executed certificates 
of resale, Form E-590. 

History S'ote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff. October 1, 1991. 

SECTION .3000 - ARTICLES TAKEN IN TRADE: TRADE-LSS: REPOSSESSIONS: 
RETURNED .MERCHANDISE: USED OR SECONDHAND .MERCH.\NDISE 



.3002 REPOSSESSIONS 



871 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



Retailers shall not deduct from their gross taxable sales the unpaid amounts on repossessed mer- 
chandise. However, where a retailer repossesses an article of tangible personal property pursuant to 
either a limited or full recourse endorsement by such retailer to a fmancing institution and he resells 
such tangible personal property to recover the unpaid sales price, such resale is not subject to sales tax 
provided the sales tax was paid on the gross sales price of the initial sale. Otherwise, the sale of any 
repossessed article is subject to the four percent (three percent until July 16, 1991) state tax and any 
applicable local sales or use tax. The full gross sales price of any used article taken in trade by the 
vendor as a credit or part payment of the sales price of such nontaxable repossessed article is subject 
to the four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax 
when sold at retail. 

History Note: Statutory Authority G.S. 105-164.13; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I. 1991; May 1. 1990; January 3, 1984. 

.3004 SECONDHAND PROPERTY 

Retail sales of used or secondhand tangible personal property which the vendor acquired by purchase, 
or by any means other than by trade-in or repossession are subject to the four percent (three percent 
until July 16, 1991) state tax and any applicable local sales or use tax. In cases where a vendor reac- 
quires property that is collateral for a nonrecourse endorsement by the vendor to a fmancing institution, 
the vendor has actually repurchased the property. In such case, it is not property repossessed by the 
vendor and the gross sales price of such property is subject to the four percent (three percent until July 
16, 1991) state tax and any applicable local sales or use tax when sold at retail. Used or secondhand 
property accepted in lieu of commissions is deemed to have been purchased. The original stock in trade 
of the merchant is not limited to newly manufactured articles; therefore, the fact that tangible personal 
property is secondhand or used does not exempt sales of such property from the tax. 

History Note: Statutory Authoritv G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1. 1991; January 3, 1984. 

.3009 TRADE-INS: IRANSEER TO NEW BUSINESS 

(a) When a proprietorship or partnership is succeeded by a corporation and the merchandise inven- 
tory is sold or transferred to the corporation for resale, tax is not due on such transactions. The cor- 
poration will be liable for collecting and remitting the four percent (three percent until July 16, 1991) 
state tax and any applicable local sales or use tax on its retail sales of tangible personal property ac- 
quired from the proprietorship or partnership, including any tangible personal property which would 
have been exempt from tax under the provisions of G.S. 105-164.13(16) if sold by the proprietorship 
or partnership as repossessed or traded-in articles. 

(b) When corporations merge or consolidate pursuant to the provisions of G.S. 55-107 and the 
merchandise inventory is transferred from the predecessor corporation to a new or surviving corpo- 
ration for resale, the tax is not due on such transactions. Furthermore, G.S. 55-1 10(b) operates so that 
the exemption from sales tax provided by G.S. 105-164.13(16) and applicable to sales of repossessed 
articles or sales of used articles taken in trade by a predecessor corporation on the sales price of new 
articles is applicable to the sale of such repossessed or traded-in articles when they are sold by the cor- 
poration formed through such statutory merger or consolidation. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February I, 1976: 
Amended Eff October 1, 1991; November 1, 1982. 

.3010 TRADE-INS ON EXEMPT SAEES 

(a) Sales by a North Carolina merchant of new tangible personal property to registered retail or 
wholesale merchants for the purpose of resale are not subject to tax provided the merchant obtains from 
the customers a properly executed certificate of resale. Form E-590. Retail sales of tangible personal 
property taken in trade on such transactions are subject to the four percent (three percent until July 
16, 1991) state tax and any applicable local sales or use tax. 

(b) Sales by a North Carolina vendor of new tangible personal property which the vendor delivers 
to a purchaser at a point outside this state or which the vendor delivers to a common carrier or to the 



6:13 NORTH CAROLIN.A REGISTER September iO, 1991 S72 



FINAL RULES 



mails for transportation and deliver)' to the purchaser at a point outside this state are not subject to tax 
provided the property is not returned to a point within the state for use or consumption. Retail sales 
in this state of used tangible personal property taken in trade on such transactions are subject to the 
four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

History Sole: Statutory Authority G.S. 105-164.4; 105-164.5; 105-164.13; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I. 1991. 

.301 1 USED PROPERTY SOLD FOR REPAIR CHARGES 

The retail sale of taxable tangible personal property that is left with merchants for repair or storage 
and is sold to satisfy repair or storage charges because the owners fail to reclaim it within a stipulated 
period of time is subject to the four percent (three percent until July 16, 1991) state tax and any ap- 
plicable local sales or use tax. 

History .\ote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1, 1976; 
Amended Eff October 1. 1991. 

.3012 TRADE: GRAIN FOR FLOUR 

If a customer brings grain to be milled and the miller gives the customer a bag of flour or com meal 
which has already been milled and runs the customer's grain into the general inventory of grain, this 
would not constitute a taxable transaction. If the customer brings grain to the miller and the miller 
actually mills the grain and delivers the resulting product to the customer, there is no sales tax on the 
milling charge. When a customer barters grain for dissimilar articles of merchandise, such as groceries 
or clothing, the four percent (three percent until July 16, 1991) state tax and any apphcable local sales 
or use tax is due on the usual retail selling price of the merchandise received for the grain. 

Histor\^ Sote: Statutory Authority G.S. 105-164.4; 105-164.13; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1. 1991. 

SECTION .3100 - RADIO AND TELEMSION ST.\TIONS: MOTION PICTLRE THEATRES 



.3101 RADIO AND TELEVISION: ETC. RECEIPTS 

Receipts of radio and television companies for the broadcasting or telecasting of programs are not 
subject to sales or use tax. Receipts of motion picture theatres derived from admission charges are not 
subject to sales or use tax. Motion picture theatres making taxable sales of tangible personal property 
through concession stands or otherwise must register with the department and must collect and remit 
tax at the state rate of four percent (three percent until July 16, 1991) state tax and any apphcable local 
rate on such sales. 

History^ Sote: Statutory Authority G.S. 105-164.3; 105-164.4; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.3102 BROADCASTFNG EQUIPMENT 

Sales of broadcasting equipment and parts and accessories thereto and towers to commercial radio or 
television companies which operate under the regulation and supervision of the Federal Communi- 
cations Commission are taxable at the rate of one percent, subject to a maximum tax of eighty dollars 
($80.00) per article. For the purpose of apphuig the maximum tax, a radio or television tower is a 
single article when the complete tower is sold by the same vendor. The tower antenna is considered 
to be a separate single article. The antenna cable or transmission cable is not a single article and the 
sale of such cable is subject to the one percent rate of tax without any maximum tax applicable thereto. 
Taxable tangible personal property purchased by such radio and television companies other than tow- 
ers, antennas and broadcasting equipment or parts and accessories thereto are subject to the tour per- 
cent (three percent until July 16, 1991) state tax and any apphcable local sales or use tax. 



87i 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



History Note: Statutory Authority G.S. 105- 164.4; 105- 164.6; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991; December I, 1984; March I, 1984; July 5. 1980. 

.3103 RENTAL OF FILMS: RECORDLSGS 

Receipts derived from the lease or rental of motion picture film to theatres or similar businesses for 
exhibition to the public and receipts derived from the lease or rental of such film to schools, churches, 
hospitals, prisons and similar institutions and organizations for exhibition to students, congregations, 
patients and inmates are exempt from sales or use tax. Receipts derived from the lease or rental of 
motion picture film to businesses, individuals, organizations and other lessees for any use other than 
for public exhibition are subject to the four percent (three percent until July 16, 1991) state tax and any 
applicable local sales or use tax. Sales of motion picture film to users or consumers are subject to the 
applicable state and local sales or use tax regardless of whether the film is publicly or privately exhibited. 
Projection equipment, screens, advertising matter and other tangible personal property which are 
leased, rented or sold at retail for use in showing film are subject to the applicable state and local sales 
or use tax regardless of whether the film is privately or publicly exhibited. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.13; 105-262; 
Eff February I, 1976; 
Amended Eff October I, 1991; November I, 1982; January 1, 1982. 

.3106 COMMERCIAL CABLE TELEVISION COMPANIES 

(a) Sales of broadcasting equipment and parts and accessories thereto and towers to commercial cable 
television companies which operate under the regulation and supervision of the Federal Communi- 
cations Commission are taxable at the rate of one percent subject to the maximum tax of eighty dollars 
($80.00) per article. For the purpose of applying the maximum tax, a television tower is a single article 
when the complete tower is sold by the same vendor. The tower antenna is considered to be a separate 
single article. Sales of antenna cable, transmission cable and trunk, feeder and drop cable to cable 
television companies for use in broadcasting are subject to a one percent rate of tax without any max- 
imum tax applicable thereto. The term "commercial cable television company," as used in this Rule, 
means a cable television company that receives consideration from its subscribers and uses broadcasting 
equipment and parts and accessories and/or a tower to receive and prepare signals for transmission over 
their cable systems and also is regulated and supervised by the Federal Communications Commission. 

(b) Taxable tangible personal property purchased by cable television companies other than towers, 
antennas and purchases of broadcasting equipment and parts and accessories thereto are subject to the 
four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

(c) The provisions of this Paragraph are applicable to sales to and purchases by cable television 
companies, as defined in this Rule, prior to and subsequent to February 15, 1984, notwithstanding the 
amendment to this Rule of January 31, 1984. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff March I. 1984; 
Amended Eff October I, 1991; August I, 1986; December I. 1984. 

SECTION .3200 - TELEPHONE .\ND TELEGRAPH COMPANIES 



.3201 rS GENERAL 

(a) Sales of central office equipment and switchboard and private branch exchange equipment to 
telephone and telegraph companies regularly engaged in providing telephone and telegraph services to 
subscribers on a commercial basis and, effective July 1, 1983, sales to those companies of prewritten 
computer programs used in providing telephone service to their subscribers are subject to the one per- 
cent sales or use tax with a maximum tax of eighty dollars ($80.00) per article. For the purpose of 
determining the items that may be properly included in the terms central office equipment, switchboard 
equipment and private branch exchange equipment, reference is made to Accounts 2124, 2211, 2212, 
2215, 2220, 2231, 2232, 2311, and 2341 of Title 47-Telecommunication Chapter 1, Part 32, Uniform 
Systems of Accounts, Class A and Class B Telephone Companies, of the Federal Communications 
Commission's rules and regulations as revised to January 1, 1988. This Rule has no application to 
future changes in the Federal Communications Commission's rules and regulations until such changes 



6:li NORTH C.iROLINA REGISTER September 30, 1991 874 



FINAL RULES 



are re\ie\ved by the Secretary' of Revenue to determine the application of tax to the tangible {jcrsonal 
property affected by such changes. 

(b) Accounts 2211, 2212, 2215, 2220, 2231 and 2232; Central Office Equipment. These accounts 
include switchboards and other equipment, instruments and apparatus necessary to the functions of 
central otTices. Sales to and purchases by the above-referred to telephone and telegraph companies of 
the items included in Central Office Fquipment Accounts, with certain exceptions, examples of which 
are set out below, are subject to the one percent sales or use tax with a maximum tax of eighty dollars 
($80.00) per article, irrespective of whether the items are classified in the Uniform System of Accounts 
as capital expenditures or as maintenance expense. Examples of items contained in Accounts 2211, 
2212, 2215, 2220, 2231 and 2232 which are taxable at the four percent (three percent untU July 16, 1991) 
state and an>' applicable local rate are: 

(1) aisle-hghting equipment attached to buildings; 

(2) minor building alterations when tangible personal property not properly termed central office 
equipment is afli.xed or attached to or in any manner becomes a part of a building or structure; 

(3) cable, other than that connecting central office units to each other or to distributing frames; 

(4) covers for transmission power apparatus; 

(5) desks and tables unless equipped with central office equipment when purchased; 

(6) foundations for engines and other equipment when part of building; 

(7) loading coils used outside central office, loud speaker equipment, operators' chairs; 

(8) platforms, rolUng ladders, tarpaulins, ticket holders, toU ticket carriers; 

(9) water stills for batter>" senice; 

(10) tools and portable testing equipment regardless of where used. 

(c) Account 2311; Station Apparatus. This account includes private branch exchange equipment in 
addition to station apparatus. Equipment which is properly included in the term private branch ex- 
change equipment is taxable at the one percent rate subject to the eighty dollar ($80.00) maximum tax 
per article, whether classified by the Uniform System of Accounts as capital expenditures or as main- 
tenance expense; however, all other equipment in this account is subject to the four percent (three 
percent until July 16, 1991) state tax and any applicable local sales or use tax. Examples of items 
contained in Account 231 1 which are taxable at the four percent state and applicable local rate are desk 
sets, hand sets, wall sets, mobile telephone equipment, backboards, battery boxes, booths, coil collec- 
tors, station wiring, protectors, arresters, ground rods, clamps, wire and similar associated equipment. 

(d) Account 2341; Large Pnvate Branch Exchange. This account contains equipment and apparatus 
necessary to the operation of the above named exchanges. The equipment and apparatus contained 
in this account which are properly included in the term private branch exchange equipment are subject 
to the one percent sales or use tax with a maximum tax of eighty dollars ($80.00) per article, whether 
classified under the Uniform System of Accounts as capital expenditures or as maintenance expense, 
but does not include any tangible personal property which is station apparatus. Examples of items 
included in Account 2341 which are taxable at the four percent state (three percent until July 16, 1991) 
and applicable local rate are operators' chairs and equipment. 

(e) Effective January 1, 1985, the gross receipts derived by a utility from sales of intrastate telephone 
service are subject to the three percent sales tax. The statute was amended effective January 1, 1989, 
to substitute the term "local telecommunications services" for the term "intrastate telephone service," 
as used in the above sentence, and to levy the three percent rate of tax only on receipts derived from 
local telecommunications services as defined by G.S. 105- 120(e). A new subdivision, G.S. 105- 164.4(a) 
(4c) was added, effective January 1, 1989, which levies a six and one-half percent sales tax on the gross 
receipts derived from toll or private telecommunications services, as defined by G.S. 105- 120(e), that 
both originate from and terminate in the state which are not subject to the privilege tax under G.S. 
105-120. The provisions of G.S. 105-164. 4(a) (4c) do not apply to telephone membership corporations 
as described in Chapter 1 17 of the General Statutes. The receipts upon which the tax is due is the total 
amount derived from the sale of telecommunications services, including any charges that go into the 
delivep," of the ser%ices that are a part of the sale of services valued in money, whether paid in money 
or otherwise, and includes any amount for which credit is given to the purchaser by the seller without 
any deduction on account of the cost of the services sold, the cost of materials used, labor or ser\ice 
costs, interest charged, losses or any -other expenses whatsoever. Therefore, all charges for tangible 
personal property and services provided in the delivery of telecommunications services to the purchaser 
are a part of the sale of services upon which the tax is due, notwithstanding that some charges may be 
billed separately to the customer from the time or flat rate charges. Set. forth in this Paragraph are the 
departmental interpretations as to the application of sales tax to transactions by telecommunications 
companies. 



875 6:13 NORTH CAROLINA REGISTER September 30, 1 991 



FINAL RULES 



(1) Sales tax should be separately stated on the bill provided to each customer; however, the fran- 
chise tax is not to be separately stated on such bills. 

(2) A telecommunications company must report receipts from sales of telecommunications services 
on an accrual basis. The sale of the services is considered to occur when the company biUs the 
customer for the sale and the applicable tax should be computed thereon. Such receipts must 
be reported on the Utilities and Municipahties Sales Tax Report, Form E-500E. Telecommu- 
nications companies with a monthly habrlity of three thousand dollars ($3,000.00) or more are 
required to file monthly reports on or before the last day of the month following the month in 
which the tax accrues except the return for tax that accrues in May is due by June 25th of each 
year. A telecommunications company that is required to file a monthly return may fde an es- 
timated return for the first month, the second month, or both the first and second months of the 
quarter. There is no interest or penalty for an underpayment submitted with an estimated 
monthly return if the utility timely pays at least 95 percent of the amount due with a monthly 
return and includes the underpayment with the company's return for the third month of the 
same quarter. A telecommunications company with a monthly liability of less than three 
thousand dollars ($3,000.00) that has been authorized by the Secretary of Revenue to file the 
Franchise Return, Form CD 311, on a quarterly basis will continue to file the Utilities and 
Municipalities Sales Tax Report, Form E-500E, on a quarterly basis by the last day of the 
month following the quarter covered by the return. 

(3) Charges for reconnecting services to customers after services have been terminated for nonpay- 
ment are a part of gross receipts from sales of telecommunications services and are subject to 
sales tax. Likewise, any charges for disconnecting services are subject to the sales tax. 

(4) Sales of telecommunications services directly to the United States Government or any agency 
thereof are not subject to sales tax. In order to be a sale to the United States Government, the 
Government or agency involved must make the purchase of the services and pay directly to the 
vendor the purchase price of the services. While sales directly to the United States Government 
or any agency thereof are exempt from sales tax, telephone companies should obtain a purchase 
requisition one time from each agency for their records. 

(5) Accounts of purchases representing taxable sales on which the sales tax has been paid that are 
found to be worthless and actually charged off for income tax purposes may at corresponding 
periods be deducted from gross sales provided, however, they must be added to gross sales if 
afterwards collected. 

(6) The local sales tax is not apphcable to those receipts from telecommunications services subject 
to the state sales tax of three percent, but the local tax is applicable to receipts from sales and 
leases of tangible personal property subject to the four percent (three percent untU July 16, 1991) 
state rate of tax. 

(7) Late payment charges are not subject to sales tax. 

(8) Any return check charges on customers' checks returned by a bank because of insufficient funds 
are not subject to sales tax. 

(9) Telecommunications companies, other vendors or lessors that sell or lease telecommunications 
equipment are liable for collecting and remitting the four percent (three percent untU July 16, 
1991) state and any applicable local sales or use tax on the amounts of such sales or leases. Such 
tax is to be reported on the monthly, quarterly or semimonthly sales and use, tax reports, and 
should not be reported on the Franchise Return, Form CD-311, or the Utilities and Munici- 
pahties Sales Tax Report, Form E-500E. 

History Note: Statutory Authority G.S. 105-164.4 105-164.6; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991; October I, 1990; July I, 1989; May I, 1985. 

.3202 TELEPHONE COMPAMES: SPECIFIC FOUR PERCENT ITEMS 

AH sales of tangible personal property to telephone and telegraph companies which is not properly 
included in the terms central office equipment, switchboard equipment, private branch exchange 
equipment or prewritten computer programs used in providing telephone services to their subscribers, 
as explained in Regulation 17 NCAC 7B .3201 are subject to the four percent (three percent until July 
16, 1991) state tax and any apphcable local sales or use tax. This includes all canned or prewritten 
computer programs to be used for administrative purposes unless specifically exempt by statute; all 
equipment, materials, supphes and apparatus to be used for distribution purposes; apparatus or 
equipment chargeable to other accounts pursuant to the instructions set out in the notes appearing 



6:13 NORTH CAROLINA REGISTER September 30, I99I 876 



FINAL RULES 



under Accounts 2124, 2211, 2212, 2215, 2220, 2231, 2232, 2311 and 2341 in the Federal Communi- 
cations Commission's telecommunication rules and regulations; all building materials, supplies, fixtures 
and equipment of ever)' kind and description annexed to or in any manner becoming a part of a 
building or structure. 

Hision Sole: Statutory Authority G.S. 105-164.4: 105-164.6; 105-262; 
Eff. February 1, 1976; 
Amended Eff. October 1, 1991: March 1, 1984; January 1, 1982. 

.3203 TOLL OR PRIVATE TELECO\LML7sICATIO\S SERVICES 

EtTective January 1, 1989, the gross receipts derived from toll telecommunications services' or private 
telecommunications ser\'ices as defmed by G.S. 105- 120(e) that both originate and terminate in the state 
which are not subject to the privilege tax under G.S. 105-120 are subject to a six and one-half percent 
state sales tax. Such receipts are not subject to the state four percent (three percent until July 16, 1991) 
or local sales taxes. ITiis six and one-half percent sales tax is not refundable under the provisions of 
G.S. 105-164. 14(b) or (c). This levy does not apply to telephone membership corp>orations as described 
in Chapter 1 17 of the General Statutes nor does it include those companies that provide pager services 
by means other than telephonic quality communications. 

Hislorv Sote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff July 1, 1989; 
Amended Eff October 1. 1991: October 1, 1990. 

SECTION .3300 - ORTHOPEDIC APPLLWCES 



.3301 EXEMPT ORTHOPEDIC APPLIANCES 

Sales of crutches, artificial limbs, artificial eyes, hearing aids, false teeth, eyeglasses ground on pre- 
scription of physicians or optometrists, pulmonarv' respirators sold on prescription of physicians, 
whether worn on the person or not, and other orthopedic appliances when the same are designed to 
be worn on the person of the owner or user, are exempt from the four percent (three percent untU July 
16. 1991) state tax and any applicable local sales and use tax. The term "orthopedic apphances" in- 
cludes headgear, bows, neckstraps, w^ires, bands, brackets, rubber bands and jackscrews when such 
items are purchased by orthodontists to be assembled into various types of appliances to be worn on 
the person of the owner or user. Items which are deemed to be tax exempt orthopedic appliances are 
set forth in this Rule for illustrative purposes: 

(1) abdominal belts; 

(2) artificial noses and ears; 

(3) cer\'ical braces; 

(4) clavicle splints; 

(5) crutch tips; 

(6) crutches; 

(7) dorsolumbar supports; 

(8) elastic anklets; 

(9) elastic arch binder; 

(10) elastic arch brace; 

(11) elastic bandage; 

(12) elastic hose; 

(13) elastic wrist bands; 

(14) head halters; 

(15) invalid walkers; 

(16) lumbosacral supports; 

(17) maternity supports; 

(18) obturators for cleft palate; 

(19) post-operative supports; 

(20) rib splints; 

(21) sacroiliac supports; 

(22) shoulder braces; 
(ll) spinal braces; 



877 6:13 NORTH CAROLLVA REGISTER September 30, I99I 



FINAL RULES 



(24 
(25 
(26 
(27 
(28 
(29 
(30 
(31 
(32 
(33 
(34 
(35 
(36 
(37 



stryker frames; 
suspensories; 
traction devices; 



trusses; 

walking canes; 
wheel chairs; 
hip prosthesis; 
bone nails; 
artificial heart valves; 
artificial arteries; 
iron lungs; 
cervical neck collars; 
leg braces; 

ostomy bags, discs, tubes and belts (but not ostomy supplies, such as cements and removers, 
powders, germicides or similar suppUes); 
(38) artificial limbs. 



History Note: Statutorv Authority G.S. 105-164.13; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I. 1991; July I, 1989; February I, 1986; January I, 1982. 

.3302 ITEMS NOT ORTHOPEDIC APPLIANCES 

Effective July 1, 1985, sales of therapeutic, prosthetic, or artificial devices, such as pulmonary 
respirators or medical beds, that are designed for individual personal use to correct or alleviate physical 
illness, disease or incapacity are exempt from sales and use tax when sold on the written prescription 
of a physician, dentist or other professional person licensed to prescribe; however, this exemption does 
not apply to the sale of a motor vehicle or to sales to persons not made pursuant to a written pre- 
scription of a physician, dentist of other professional person licensed to prescribe. Vendors making 
sales of therapeutic, prosthetic, or artificial devices pursuant to written prescriptions must keep sales 
records which clearly segregate such prescription sales. All original prescriptions must be filed and kept 
available for inspection by the Secretary of Revenue or her authorized agent. The items listed in this 
Rule are not orthopedic appliances within the meaning of G.S. 105-164.13(12) and are subject to the 
four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax when 
sold to users or consumers in this state unless sold pursuant to a written prescription as provided herein: 

(1) athletic supporter; 

(2) ball o foot cushions; 

(3) bunion protector; 

(4) bunion reducer; 

(5) foot cushion; 

(6) heel cushions; 

(7) shoe insoles; 

(8) toe flex; 

(9) walk strate pads; 

(10) wigs; 

(11) heating pads; 

(12) heat lamps; 

(13) oxygen regulators (medical); 

(14) oxygen tents; 

( 1 5) vaporizers. 

History Sole: Statutory Authority G.S. 105-164:4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1. 1991; February 1, 1986. 

SECTION .3400 - ME.MORIAL STONE AND MONUMENT DEALERS AND 

AIANLFACTURERS 



.3401 MEMORIAL STONE SALES 



6:13 NORTH CAROLINA REGISTER September 50, 1991 S78 



FINAL RULES 



(a) Except as provided in Paragraph (b) of this Rule, sales of memorial stones to users or consumers 
are subject to the four percent (three percent until July 16, 1991) state tax and any applicable local sales 
or use tax. Where the seller of a memorial stone or monument agrees to install such stone or monu- 
ment upon a foundation, a segregation must be made of materials used and installation charges in- 
volved, on an invoice given to the customer at the time of the sale. The seller may deduct the 
installation labor costs or services from the gross proceeds of the sale only when a segregation of the 
billmg is made to the customer; otherwise, the total charge is taxable. 

(b) Effective July 1, 1986, the first fifteen hundred dollars ($1,500.00) of all funeral expenses, including 
gross receipts from tangible personal property furnished and senices rendered by funeral directors, 
morticians and undertakers, or by monument and memorial stone dealers, shall be exempt from sales 
or use taxes. The term "funeral expenses", as used in this Rule, shall include charges by monument 
or memorial stone dealers for the sale and installation of memorial stones and monuments purchased 
by the estate of a deceased person and allowed as a funeral expense. It shall also include charges by 
monument and memorial stone dealers for the sale and installation of memorial stones and monuments 
purchased by a family member or other person responsible for the funeral expenses within one year 
after the death of the deceased person. The fifteen hundred dollars ($1,500.00) exemption is applicable 
to the total charge for the sale and installation of a memorial stone or monument notwithstanding that 
the installation charge may be separately stated on the invoice at the time of the sale and in the vendor's 
records. Vendors making sales of memorial stones and monuments or services subject to the fifteen 
hundred dollars ($1,500.00) exemption must keep sales invoices, books and other records showing the 
name of the purchaser, the total sales price of the tangible personal property, the date of the sale, the 
date of the death of the deceased person and the total sales price of all tangible personal property and 
services furnished. 

History Note: Statutory Authority G.S. 105-164.3 105-164.4; 105-262; 
Eff. February I. 1976; 
Amended Eff. October f 1991; July I, 1990. 

.3402 MONUMENT MANLFACTLRERS: TOOLS AND SUPPLIES 

Sales to monument manufacturers of stencils, abrasives and cutting tools and equipment used by such 
manufacturers in the cutting, shaping, and pohshing process and the solvents used to remove the sten- 
cils from the monuments arc subject to the one percent rate of tax. Monument dealers who do not 
cut, shape, polish and otherwise process monuments are not classified as manufacturers and sales of 
stencils and other supplies to monument dealers for use in lettering or pohshing monuments which they 
seU are subject to the four percent (three percent until July 16, 1991) state tax and any apphcable local 
sales or use tax. 

History Sote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff Februarv 1. 1976; 
Amended Eff October 1, 1991. 

.3403 SUPPLIES FOR MONUMENT ESSTALLATION 

Purchases of sand, cement, lumber and other tangible personal property by monument dealers for use 
in installing monuments are subject to the four percent (three percent until July 16, 1991) state tax and 
any applicable local sales or use tax. Charges by dealers to their customers for installing monuments 
are exempt from tax when such charges are separately stated from the charge for the monument. 

Historv S'ote: Statutory Authority G.S. 105- 164.3; 105-164.4; 105-164.6; 105-262; 
Eff. Februarv 1. 1976; 
Amended Eff October 1, 1991. 

SECTION .3500 - .MACHINISTS: FOLADRVMEN: .\ND PATIERN MAKERS 



.3501 IN GENERAL 

(a) Sales to users or consumers of dies, castings, pattems, tools, machinery and any other tangible 
personal property made by machinists, foundrymen or pattern makers, and parts and other tangible 
personal property fabricated and sold for use or consumption on or with such items of tangible personal 
property, are subject to the four percent (three percent until July 16, 1991) state tax and any apphcable 



879 6:13 NORTH CAROLINA REGISTER September 30, 1 991 



FINAL RULES 



local sales or use tax unless such sales qualify for the one percent rate of tax under the provisions of 
G.S. 105-164.4(a)(ld), or are wholly exempt from the tax under the provisions of G.S. 105-164.13. 

(b) The tax due hereunder shall be computed at the applicable rate on the full selling price of such 
property, including charges for any services that go into the fabrication, manufacture or delivery thereof. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-164.13; 105-262; 105-264; 
Eff. February I, 1976; 
Amended Eff. October I, 1991; January I, 1982; May II, 1979; September 30, 1977. 

.3502 MOLDS: DIES: MILL MACHINERY 

Sales of molds, patterns or dies by machinists, foundrymen, pattern makers or others to manufacturing 
industries and plants for their use as miJQ machinery or mill machinery parts and accessories are subject 
to the one percent state rate of sales or use tax with an eighty dollar ($80.00) maximum tax per article. 
Sales of molds, patterns or dies to other users or consumers in this state are subject to the four percent 
(three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February I, 1976; 
Amended Eff October I, 1991; October 1, 1988. 

.3505 MOLDS: DIES: NONxMANUFACTLRERS' USE 

Manufacturers making retail sales of molds, patterns or dies to nonmanufacturing users or consumers 
within and without this state, with right of possession and title thereto passing to such customers, are 
liable for collecting and remitting the three percent four percent (three percent until July 16, 1991) state 
tax and any applicable local sales or use tax on such sales, when the manufacturers seUing the molds, 
patterns or dies retain them in their possession within this state for use in manufacturing tangible per- 
sonal property for sale to such customers. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February I. 1976; 
Amended Eff October I. 1991; October I, 1988. 

SECTION .3600 - FEDERAL EXPENSES 



.3601 IN GENERAL 

(a) Except as otherwise provided in Paragraph (b) of this Rule, aU funeral expenses, including gross 
receipts from tangible personal property furnished or services rendered by funeral directors, morticians 
or undertakers are subject to the four percent (three percent until July 16, 1991) state tax and any ap- 
plicable local sales or use tax. Where cofTms, caskets, vaults and memorial stones or monuments are 
provided by the same funeral home and a separate charge is paid for services, the provisions of this 
Rule shall apply to the total for both. For additional information regarding the sale and installation 
of memorial stones and monuments, see 17 NCAC 7B .3400. 

(b) Prior to July 1, 1986, the first one hundred fifty dollars ($150.00) of the charge for such tangible 
personal property furnished or services rendered, or both, shall not be subject to the tax. On and after 
July 1, 1986, the first one hundred fifty dollars ($150.00) statutory exclusion is increased to one thou- 
sand five hundred dollars ($1,500). In addition to the statutory exclusion, the foUowing charges may 
also be excluded from taxable receipts provided such charges are separately and accurately identified in 
the funeral directors' records: those services which have been taxed pursuant to G.S. 105-164.4(4); 
those services performed by any beautician, cosmetologist, hairdresser or barber employed by or at the 
specific direction of the family or personal representative of the deceased; burial permit fees for 
interment in church cemeteries; stone deposits advanced to city and church cemeteries to guarantee the 
erection of a grave stone within a given time; transportation charges by common carriers for trans- 
porting the deceased from the place of death to the place of interment; honorariums; ambulance service 
in cases of fmal illness where the bill was not paid prior to death and is subsequently added to the fu- 
neral bill; cemetery lots; cash advances; grave opening fees; charges for telephone calls to friends and 
relatives of the deceased for the convenience of and at the request of the family of the deceased when 
billed separately to the family; charges for death certificates procured by or at the specific direction of 
the family or personal representative of a deceased person; and amounts paid directly to the funeral 



6:U NORTH CAROLINA REGISTER September 50, 1991 880 



FINAL RULES 



director by agencies of the federal government except death benefit payments by the Social Security 
Administration which require the authorization of the surviving spouse. 

(c) Sales to funeral directors, morticians and undertakers of graveside equipment, embalming fluid, 
cosmetics, disinfectants, chairs, flower racks, casket trucks and other supplies or equipment for use in 
conducting their businesses are subject to the four percent (three percent untU July 16, 1991) state tax 
and any applicable local sales or use tax. 

History Sole: Statutory Authority G.S. 105-164.4; 105-/64.6; 105-164.13; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I. 1991; February I, 1987; February 1, 19S6; January 3, 1984. 

SECTION .3700 - LUBRICANTS: OILS AND GREASES 



.3701 LUBRICATING SERVICE 

Chassis lubricants or greases, equipment and other tangible personal property used in lubricating 
motor vehicles are subject to the three percent sales or use tax when sold to service stations, garage 
operators and other persons engaged in the business of lubricating motor vehicles. Charges by the 
above businesses for ser\'iccs rendered in lubricating motor vehicles are not subject to the four percent 
(three percent until July 16, 1991) state tax and any applicable local sales or use tax when sold to tax 
pro\"ided such businesses maintain records which separately reflect the charges for lubricating motor 
vehicles and the charges for any sales of tangible personal property. 

History Xote: Statutory Authority G.S. 105-164.3; 105-164.4; 105-262; 
Eff February 1, 19'' 6; 
Amended Eff. October 1. 1991. 

.3702 SALES OF LUBRICANTS 

Sales of motor oUs, transmission or differential oUs or greases, or other such oils and greases by lu- 
bricating stations, service stations, garage operators and similar businesses to users or consumers are 
subject to the four percent (three percent until July 16, 1991) state tax and any applicable local sales 
or use tax and such businesses must collect and remit the tax thereon to the department, except that 
sales of oils and lubricants to manufacturers for use in lubricating production machinery' are taxable at 
the rate of one percent. Sales of such property by any vendor to commercial fishermen for use by them 
in the commercial taking or catching of seafood and sales of such property for use by or on ocean-going 
vessels which ply the high seas in transporting in interstate or foreign commerce freight or passengers 
for hire exclusively are exempt from the tax. 

History .Xote: Statutory- Authority G.S. 105-164.4; 105-164.13; 105-262; 
Eff. February 1 , 1976; 
Amended Eff October 1. 1991. 

.3703 CAR \\ ASH BUSINESSES 

The gross receipts from washing cars by persons operating a car wash business are exempt from tax. 
Such persons are liable for payment of the four percent (three percent until July 16, 1991) state tax and 
any applicable local sales or use tax on tangible personal property which they purchase for use in the 
operation of such businesses. If car wash operators make sales of tangible personal property through 
vending machines or otherwise, they are liable for collecting and remitting tax thereon. 

History Sote: Statutory Authority G.S. 105-164.3; 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff. October 1, 1991. 

SECTION .3800 - PREMIUMS: GIFTS AND TRADING STAMPS 



.3801 PREMIUMS .\ND GIFTS 

Sales to a retailer of tangible personal property for use by the retailer as premiums or gifts are subject 
to the four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax 



881 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



and he should remit the tax on such purchases to his suppliers. If the suppliers are located outside this 
state and do not collect the North Carolina sales or use tax on such purchases, the purchaser becomes 
liable for remitting such tax directly to the department. If the property purchased is of the character 
customarily sold by the retailer, he may purchase the same without payment of the tax if he furnishes 
his supplier with a certificate of resale, Form E-590. In such case, the retailer must remit to the de- 
partment the tax on all taxable articles withdrawn from stock and used as premiums or gifts. The 
provisions of this Paragraph do not apply to any purchases of property to be used in redeeming trading 
stamps or other media. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991. 

.3802 SALES OF TRADING STAMPS 

Sales of trading stamps to a registered merchant, whether a trading stamp company or other retailer, 
are deemed to be sales for the purpose of resale and such sales are not subject to the tax. When the 
retailer distributes the stamps to his customers in cormection with retail sales of other property, the 
stamps are considered to be included in the price of the items purchased by such customers. Sales to 
a trading stamp company of catalogues, stamp books, advertising matter or other tangible personal 
property furnished free to retail merchants or used by the trading stamp company to promote its stamp 
program are subject to the four percent (three percent until July 16, 1991) state tax and any applicable 
local sales or use tax. Sales of such items to other retail merchants are also subject to said tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.5; 105-262; 
Eff. February I, 1976; 
Amended Eff October 1, 1991. 

.3803 REDEMPTION OF TRADING STAMPS 

(a) Trading stamp companies which redeem trading stamps are deemed to be engaged in the business 
of selUng tangible personal property at retail for a consideration. Such companies must register with 
the department and collect and remit the four percent (three percent until July 16, 1991) state tax and 
any applicable local sales or use tax due on all such sales. The tax is to be computed on the redemption 
value of the stamps, stamp book, or other media which the trading stamp company accepts for the 
premium. 

(b) A trading stamp company or other vendor which sells goods and trading stamps to a retailer who 
win himself redeem the stamps should secure a certificate of resale from such retailer since, in such in- 
stances, the trading stamp company or other vendor is deemed to be seUing tangible personal property 
for the purpose of resale. Such retailer is Liable for the four percent (three percent until July 16, 1991) 
state tax and any applicable local sales tax on the redemption value of the stamps, stamp book or other 
media which he accepts for any such premium. 

(c) If a trading stamp company or other merchant has questions relative to any transaction or oper- 
ation involving the use of trading stamps, premiums or gifts, such trading stamp company or other 
merchant should submit all pertinent facts relating thereto to the department for a ruling as to their tax 
status. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.3804 GIFT CERTIFICATES 

Charges by vendors for gift certificates which can be exchanged for merchandise are not subject to sales 
tax. When the holder of such gift certificates exchanges the certificate for merchandise, the transaction 
is subject to the four percent (three percent until July 16, 1991) state tax and any applicable local sales 
or use tax. The basis for the tax is the sales price of the property. 

History Note: Statutory Authority G.S. 105-164.3; 105-164.4; 105-262; 
Eff. February 1 , 1976; 
Amended Eff. October 1, 1991. 



6:13 NORTH CAROLINA REGISTER September 30, 1991 882 



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SECTION .3900 - CONTAINERS: WT^APPING: PACKING AND SHIPPING .MATERIALS 



.3901 IN GENERAL 

(a) Sales to manufacturers, producers, wholesalers and retailers of wrapping paper, labels, bags, car- 
tons, and the other items specified in G.S. 105-164.13(23) are not subject to the tax when such materials 
are used for packaging, shipping, or delivering tangible personal property sold at wholesale or retail, and 
when such materials constitute a part of the sale of such tangible personal property and are delivered 
with it to the customer. The exemption does not apply to items which are used solely for delivery 
purposes and which do not become a part of the sale of tangible personal property. 

(b) Sales of any such items of tangible personal property to persons who use the same in rendering 
ser\'ices and all other sales of any such items of tangible personal property which are used for any 
purpose other than to accompany the sale of tangible personal property are subject to the four percent 
(three percent until July 16, 1991) state tax and any applicable locaJ sales or use tax, except those sales 
to commercial laundries or to pressing and dry cleaning plants which are tax exempt under G.S. 
105-164.13(10), sales to freezer locker plants of wrapping paper, cartons and other supplies which are 
taxed at the rate of one percent under G.S. 105-164.4(a)(lc)f and sales of containers to farmers or 
producers for use in planting, producing, harvesting, curing, marketing, packaging, sale, or transporting 
or deliver)- of their products when such containers do not go with and become part of the sale of their 
products at wholesale or retail which are taxed at the rate of one percent under the provisions of G.S. 
105-164.4(a)(ld)i. 

History \ole: Statutory Authority G.S. 105- J 64.4; 105-164.6; 105-164.13: 105-262; 
Eff. February 1. 1976; 
Amended Eff. October 1, 1991; April 1, 1986: May 11. 1979. 

.3902 HOGSHEADS: CARDBOARD CONTAINERS: ETC. 

Sales of wooden hogsheads, cardboard containers and strapping to operators of prizeries for use in 
mo\ing tobacco from the prizer>' to the redr>ing plant are subject to the four percent (three percent 
until July 16, 1991) state tax and any appUcable local sales or use tax. 

History Sote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1, 1976; 
Amended Eff October 1. 1991. 

.3903 PACKAGING MATERIALS: WAREHOUSEMEN AND MOVERS 

Sales of packaging and packing materials to warehousemen and movers for use in the performance 
of storage and moving services are subject to the four percent (three percent until July 16, 1991) state 
tax and any appUcable local sales or use tax. 

History Xote: Statutory' Authority G.S. 105-164.4; 105-164.6: 105-262; 
Eff February 1, 19^6: 
Amended Eff. October 1, 1991. 

.3904 MARKING MACHINES 

Sales of marking machines to retailers and wholesalers for use in imprinting price, size, or other in- 
formation on tickets, tags, etc., are subject to the four percent (three percent until July 16, 1991) state 
tax and any applicable local sales or use tax. 

History Sote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February I. 1976; 
Amended Eff October 1. 1991. 

.3905 ICE H.ANDLING SUPPLIES 

Sales of ice picks, ice tongs, tarpaulins and reusable canvas bags to merchants for use in the delivery 
of ice to customers, but which do not become a part of the sale, are subject to the four percent (three 
percent until July 16, 1991) state tax and any applicable local sales or use tax. 

Hi.uorv Xote: Statuton' Authority G.S. 105-164.4; 105-164.6; 105-262; 



883 6:13 NORTH CAROLINA REGISTER September 30, I99I 



FINAL RULES 



Eff. February I, 1976; 
Amended Eff. October I, 1991. 

SECTION .4000 - FERTILIZER. SEEDS: FEED AND INSECTICIDES 



.4003 FEED: REMEDIES: VACCINES: MEDICATIONS: FOR LFV ESTOCK AND POULTRY 

Sales of remedies, vaccines, medications, litter materials and feed for livestock and poultry', including 
cattle, horses, mules, sheep, chickens, turkeys, and other domestic animals usually found on a farm and 
sales of remedies, vaccines, medications or feed for animals, bees, or poultry held or produced for 
commercial purposes are exempt from sales or use tax. The terms "remedies" and "medications" shall 
mean all medicines in the generally accepted sense of the term and also includes tonics for internal use, 
vitamins, ointments, liniments, antiseptics, anaesthetics and other medicinal substances having preven- 
tive and curative properties in the prevention, treatment or cure of disease in animals. The term 
"feed" includes dietary supplements, such as minerals, oyster shells, salt, bone meal, and other similar 
preparations or compounds to be fed directly or to be mixed with feed for livestock or poultry for 
normal growth, maintenance, lactation, or reproduction, but does not include sand or grit. Retail sales 
of sand or grit for use in the production of livestock or poultry are subject to the four percent (three 
percent until July 16, 1991) state tax and any applicable local sales or use tax. Retail sales of remedies, 
vaccines, medications. Litter materials and feed for pets, such as birds, cats and dogs, are subject to the 
four percent state tax and any applicable local sales or use tax. 

History \ote: Statutory Authority G.S. 105-164.4; 105-164.13; 105-262; 
Eff February 1. 1976; 
Amended Eff October 1, 1991; May I, 1990; May 11. 1979. 

.4006 HOUSEHOLD LVSECTICIDES: ETC. 

Sales of rodenticides, insecticides, herbicides, fungicides and pesticides for household purposes are 
subject to the four percent (three percent until July 16, 1991) state tax and any apphcable local sales 
or use tax. Sales of insecticides for use on lawns and golf courses are subject to the four percent rate 
of tax. Sales of insecticides and herbicides to contractors for use in performing contracts to clear 
highway rights-of-way are subject to the four percent state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-262; 
Eff February I, 1976; 
Amended Eff October 1, 1991; December 1, 1982. 

SECTION .4100 - ARTISTS: ART DEALERS: PHOTOGRAPHERS: ETC. 



.4101 OBJECTS OF ART 

Retail sales of objects of art and art supplies are subject to the four percent (three percent until July 
16, 1991) state tax and any applicable local sales or use tax except those sales to the North Carolina 
Museum of Art of paintings and other objects or works of art for public display the purchases of which 
are fmanced in whole or in part by gifts or donations. The e.xemption applies only to sales to the 
museum or purchases by the museum as specified herein. Purchases of works of art by the museum 
that do not involve donated funds and purchases by the museum of other tangible personal property 
for use or consumption are taxable. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-164.13; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1. 1991. 

.4102 PHOTO FINISHING 

The entire charge for photo finishing, including all charges for developing or printing, is subject to the 
four percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutor\' Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February I, 1976; 



6:13 NORTH CAROLINA REGISTER September 30, 1991 884 



FINAL RULES 



Amended Eff. October I, 1991. 

.4103 PHOTO TrVTING 

The tinting or coloring of photographs delivered to a photographer or photo finisher by a customer 
constitutes a service and the receipts therefrom are not taxable. Sales to photographers and photo 
fmishers of materials to be used by them in performing such services are subject to the four percent 
(three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

Histon- \ote: Siaiuton' AuthorUy G.S. 105- 164.4; 105-164.6; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I. 1991. 

.4104 BLIEPRINTS 

Sales of photostatic copies or blueprints by a photostat or blueprint producer or others to consumers 
or users are subject to the four percent (three percent until July 16, 1991) state tax and any applicable 
local sales or use tax to be computed on the gross receipts. 

History Sole: Statutory Authority G.S. 105- J 64.4; J 05- J 64.6; J 05-262; 
Eff February I, 1976; 
Amended Eff October I. 1991. 

.4105 PHOTO SUPPLIES AND MATERIALS 

Sales of frames, films and other articles by photographers, photo fmishers or others to users or con- 
sumers are subject to the four percent (three percent until July 16, 1991) state tax and any apphcable 
local sales or use tax. Gross receipts from sales of photographs by commercial or portrait 
photographers or others are subject to the four percent state tax and any applicable local sales or use 
tax; however, sales to commercial or portrait photographers of materials which become an ingredient 
or component part of the finished picture are not subject to the tax. Mounts, frames, and paper be- 
come an ingredient or component part of the finished picture and the sales of such materials to com- 
mercial or portrait photographers are not subject to the tax. Materials such as fdms, chemicals, proof 
paper, cameras, trays, and similar items that are used in the manufacture or fabrication of such pictures 
are subject to the one percent rate of tax when such materials are sold to commercial or portrait 
photographers. 

Historx- Sote: Statutorv Authoritv G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
.Amended Eff October 1. 1991. 

.4106 PHOTOENGR.\\ TsGS: ELECTROTYPES: ETC. 

Sales to commerc4al printers of photoengra\ings, electrotypes and lithographs, when the same are not 
for resale, but which the purchaser uses in printing tangible personal property for sale are subject to the 
one percent rate of sales or use tax. Sales of these items and all other pnnting equipment and supplies, 
including paper and mk. to consumer or captive printers are subject to the four percent (three percent 
until July 16, 1991) state tax and any applicable local sales or use tax. 

Histon,- Xote; Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February' I, 1976; 
Amended Eff October I, 1991. 

.4107 .MOVIE FILM DEVELOPESG 

The entire charge for developing movie fihn for users or consumers is subject to the four percent (three 
percent untU July 16, 1991) state tax and any applicable local sales or use tax unless subject to a lesser 
rate of tax by Statute. Charges to commercial television stations, which operate under the regulation 
and superN'ision of the Federal Communications Commission, for developing film for use by them in 
broadcasting and telecasting programs are subject to the one percent rate of tax. 

History Sote; Statutory Authority G.S. 105-164.4; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991; July 5. 19S0. 



885 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



.4109 BLUEPRINTS SOLD TO ARCHITECTS 

Sales of blueprints, photographs and other tangible personal property to an architectural or engineer- 
ing firm for use or consumption and not for resale are subject to the four percent (three percent until 
July 16, 199!) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991. 

SECTION .4200 - SALES TO THE LTSITED STATES GOVERNMENT OR AGENCIES 

THEREOF 



.4202 EXEMPT SALES TO L7MTED STATES GOVERNMENT 

(a) Purchase Requisitions: Some agencies, instrumentalities, organizations, or activities of the United 
States Government listed in 17 NCAC 7B .4201 will be using purchase requisitions or affidavits in 
connection with their purchases. A vendor making sales directly to the United States Government, 
or any agency or instrumentality thereof, that issues purchase requisitions or affidavits must obtain and 
keep copies of such purchase requisitions or affidavits signed by the purchasing officer stating that such 
sales are being made directly to the United States Government or an agency or instrumentality thereof. 
Copies of such purchase requisitions or affidavits must be retained by the vendor in his files for three 
years following the date of sale and must be available for inspection by the Secretary of Revenue or 
her agents upon request. 

(b) United States Government Bankcards: All departments and agencies within the Federal Gov- 
ernment are authorized to use the United States Goverrunent Bankcard or I.M.P.A.C. (International 
Merchant Purchase Authorization Card) card in connection with their purchases. This card is a pur- 
chasing card and may not be used by employees for travel or entertainment. The United States Gov- 
ernment obtains title to the property purchased by the use of the card and pays the bank directly for 
the property. The face of the card is embossed with the statement "US GOVT TAX EXEMPT" di- 
rectly above the name of the card holder so that the copy which must be retained by the merchant in 
his files for three years following the date of sale will have the necessary proof that the property was 
obtained for and paid for by the Federal Government if inspected by the Secretary of Revenue or her 
agents. 

(c) Diner's Club Credit Cards: At this time, the Diner's Club Corporate Charge Card has only been 
issued to the Bureau of the Census and the Defense Nuclear Agency and is used by federal agencies to 
pay for group lodging and rental of facilities and equipment used to train employees. The cards issued 
to employees of the Bureau of the Census are embossed with the name of the employee followed by 
"Bureau of the Census" followed by the statement "For Official Use Only". The cards which are issued 
to the Defense Nuclear Agency are embossed with the name of the employee followed by the date the 
card was issued, the name of the state where the employee works, the letters "U.S." and the period 
during which the card is valid. 

Many United States Government employees are issued individual Diner's Club cards for use when 
traveling. Purchases made by employees on these cards are subject to the retail sales tax because the 
employee is required to pay charges and then get reimbursed by the government. Thus, the sale is not 
made directly to the United States Government. The individual (and taxable) card can be distinguished 
from the corporate card because the individual Diner's Club card shows "Department of Commerce - 
Census" after the employee's name and there is no statement that the card is for official use. Also, this 
particular card is to be used to make individual purchases rather than group purchases. Copies of such 
credit card receipts must be retained by the vendor in his files for three years following the date of sale 
and must be available for inspection by the Secretary of Revenue or her agents upon request. 

History Note: Statutory Authority G.S. 105-164.13; 105-262; 
Eff February 1. 1976; 
. Amended Eff October 1, 1991; August 1, 19S8. 

.4203 CONTRACTORS FOR THE FEDERAL GOVERNMENT 



6:13 NORTH CAROLINA REGISTER September 30, 1991 886 



FINAL RULES 



Sales of tangible personal property to contractors for use in performing contracts with the United 
States Government or its agencies and instrumentalities are subject to the four percent (three percent 
until July 16, 1991) state tax and any apphcable local sales or use tax. 

History Sote: Statutory Authoriiv G.S. 1 05- 1 64.4; 105-164.6; 105-262; 
Eff. Februan' I. 19^6; 
Amended Eff. October I, 1991. 

.4206 FED SAVrsCS/LOAN ASSOC: NATL BANKS/ST CHARTERED CREDIT lAIONS 

Sales of tangible personal property to federal savings and loan associations, state banks, national 
banlcs, and state chartered credit unions for use or consumption are subject to the four percent (three 
percent until July 16, 1991) state tax and any applicable local sales or use tax. 

History Sote: Statutory Authority G.S. 105-164.4: 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.4207 RESER\ E OFFICERS' L^IFORMS 

Sales of uniforms, other than sales directly to the United States Government, for use in reserve officers 
training programs are subject to the four percent (three percent until July 16, 1991) state tax and any 
applicable local sales or use tax. 

History- Sote: Statutory Authority G.S. 105-164.4: 105-164.6: 105-262; 
Eff February 1. 1976; 
Amended Eff October 1. 1991. 

SECTION .4400 - LEASE OR RENTAL 



.4402 ROYALTIES 

Royalties paid, or agreed to be paid, either on a lump sum or production basis, for tangible personal 
property used in this state are rentals subject to the four percent (three percent until July 16, 1991) state 
tax and any applicable local sales or use tax. 

Histor\- Sote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February- 1. 1976: 
Amended Eff. October 1. 1991. 

.4403 .MAINTENANCE OF LEASED PROPERTY 

(a) Sales of tangible personal property to registered lessors or retailers for the purpose of lease or 
rental e.xclusi\ely are wholesale sales and not subject to tax pro\ided properly executed certificates of 
resale are furnished to the vendors of such property. Sales of lubricants, repair parts and accessories 
to such lessors or retailers who use them to repair, recondition or maintain such lease or rental personal 
property are also wholesale sales when properly executed certificates of resale are provided to vendors 
of this type property. Lessors are responsible for payment of any applicable state and local tax on the 
cost price of such items if they are used for a purpose other than repairing or maintaining leased or 
rented property or resale as such. .\ny tax due thereon is to be paid to the Secretary of Re\cnue on 
the lessors or retailers' sales and use tax returns. 

(b) When the lessee purchases lubricants and repair parts to maintain tangible personal property being 
leased or rented, the lessee is liable for payment of the four percent (three percent until July 16, 1991) 
state tax and any applicable local sales or use tax on the cost price of such purchases to the vendors 
or to the Secretarv' of Re\'enue. If a separate maintenance agreement for a fi.xed fee where no separate 
charge is made for parts and labor is executed by the lessor and lessee whereby the lessor or the lessee 
agrees, for a consideration separate from the lease payments, to maintain property being leased or 
rented, purchases of repair parts and lubricants by either party are subject to the tax payable by the 
purchaser thereof as described in this Rule. 

History- Sote: Statutory Authority G.S. 105-164.4; 105-164.5; 105-164.6; 105-262; 
Eff February 1, 1976; 



887 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



Amended Eff. October I. 1991; March I, 1984. 

.4406 INSURANCE ON LEASED PROPERTY 

The gross proceeds derived from or amounts agreed to be paid for the lease or rental of all kinds and 
types of tangible personal property for storage, use or consumption within this state are subject to the 
four percent (three percent untU July 16, 1991) state tax and any applicable local sales or use taxes. 
The tax shall be computed on the gross receipts, gross proceeds or rental payable without any deduction 
whatsoever for any insurance charges paid to insure the property of the lessor or to insure the lessor 
against hability for damages to the property or person of others. When the lessee purchases insurance 
on his own property or to insure himself against liability for damages to the property or person of 
others, insurance premiums paid by such lessee directly to the insurer or to the lessor as agent for 
transmittal to the insurer are exempt from tax. If the lessee pays such insurance premiums directly to 
the lessor as agent for transmittal to the insurer, such amounts are exempt from tax provided they are 
separately stated from the charges for the lease or rental of tangible personal property in the lessor's 
records and on the invoice given to the lessee; otherwise, the total amount charged by the lessor is 
subject to the tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1 , 1976; 
Amended Eff. October /, 1991; July 5, 1980. 

.4414 GOLF DRIVING RANGE FEES 

Charges by golf driving ranges for the use of the range are not subject to sales or use taxes. In such 
cases, the person who pays the charge is generally entitled to the use of a golf club, basket of balls and 
the driving range; thus, there is no sale or rental of tangible personal property. Sales or rentals of tan- 
gible personal property by such businesses are subject to the four percent (three percent until July 16, 
1 99 1 ) state tax and any apphcable local sales or use tax. 

History Note: Statutory Authority G.S. / 05- 164.3; 105-164.4; 105-262; 
Eff February I. 1976; 
Amended Eff October 1, 1991. 

.4415 SKATING RLSK FEES 

Charges for the use of a skating rink or bowling alley are not subject to sales or use taxes; however, 
if such businesses rent tangible personal property, such as skates and shoes, charges for same are subject 
to sales tax. Sales of tangible personal property by such businesses are subject to the four percent (three 
percent until July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.3; 105-164.4; 105-262; 
Eff. February 1, 1976; 
Amended Eff October 1, 1991. 

.4416 m\^ USE TAX/ALT GROSS RCPTS TAX/MOTOR VEH HELD/LEASE/RENTAL 

(a) G.S. 105-187.5 provides that, effective October 1, 1989, lessors of motor vehicles may elect to pay 
the highway use tax to the Commission of Motor Vehicles when applying for a certificate of title for a 
motor vehicle purchased by the retailer for lease or rental or may elect to collect and remit the tax to 
the Secretary of Revenue on the lease or rental receipts derived therefrom. Any credit allowed by a 
vendor in the lease agreement for the equity in a traded-in vehicle is considered a part of the gross re- 
ceipts derived from the lease or rental of a motor vehicle and is subject to the highway use tax. Effective 
April 23, 1991, G.S. 105-187 was amended by adding Section 1 1 which allows lessors of motor vehicles 
the option of paying the highway use tax to the Commissioner of Motor Vehicles rather than the al- 
ternate gross receipts tax to the Secretary- of Revenue on motor vehicles held in their inventory' for lease 
prior to October 1, 1989, and leased or rented on or after that date. To make the election allowed by 
this Section, a retailer must complete a form provided by the Division of Motor Vehicles. That Divi- 
sion will notify the Secretary of Revenue of a retailer who makes-an election under this Section. If this 
election is made, no credit will be allowed for any tax paid on the purchase or rental of a motor vehicle 
under the Sales and Use Tax Law and for any tax paid on gross receipts under the Highway Use Tax 
Act. The taxes collected under this Section will be credited to the General Fund. 



6:13 NORTH CAROLINA REGISTER September 50, 1991 888 



FINAL RULES 



(b) Effective October 1, 1989, the rate of highway use tax on motor vehicle lease or rental receipts 
will be eight percent for the first 90 continuous days of lease or rental of a vehicle to the same person, 
and the rate will reduce to three percent for the remainder of the continuous period during which the 
vehicle is leased or rented to that person. The maximum tax of one thousand dollars ($1,000.00) 
[effective July 1, 1993, the maximum tax will increase to one thousand five hundred dollars ($1,500.00)) 
applicable to the sale of a motor vehicle applies when the vehicle is leased or rented to the same person 
for more than 90 continuous days and the tax paid by a person from the first day of such period applies 
toward the maximum tax. 

(c) Effective July 1, 1991, the Highway L'se Tax Act was amended to defme long-term and short-term 
lease or rental. [x)ng-term lease or rental means a wntten agreement to lease or rent property for at 
least 365 continuous days to the same person. Short-term lease or rental is a lease for less than 365 
continuous days. The rate of tax on the gross receipts from the short-term lease or rental of a motor 
vehicle is eight percent and the tax rate on the gross receipts from the long-term lease or rental of a 
motor vehicle is three percent. The maximum tax of one thousand dollars ($1,000.00) [effective July 
1, 1993, the maximum tax will increase to one thousand five hundred dollars ($1,500.00)| applies to a 
continuous lease or rental of a motor vehicle to the same person. 

(d) A retailer who elects to pay tax to the Secretary of Revenue on the gross receipts from the lease 
or rental of a motor vehicle must make this election when applying for a certificate of title for the ve- 
hicle. To make the election, the retailer must complete a form provided by the Division of Motor 
Vehicles. Once made, an election is irrevocable. The eight percent rate of tax wLU be deposited m the 
General Eund. The three percent rate of tax will be deposited to the Highway Trust Eund. Separate 
forms for reporting the separate rates of tax on motor vehicle lease receipts will be provided by the 
Department of Revenue to motor vehicle lessors upon receipt of their request for such forms. 

History Note: Statutory Authority G.S. 105-187.3: I05-I87.4; 105-187.5; 105-187.6; 105-187.8; 
105-187.9; 105-187.11; 105-262; 
EJJ. October 1. 1991. 

SECTION .4500 - LAL^SDRIES: DRV CLEANING PLANTS: LALADERETTES: LINEN 
RENTALS: AND SOLICITORS EOR SUCH BLSESESSES 



.4501 RECEIPTS OF LALNsDRIES: ETC. 

(a) The gross receipts derived from the following are subject to the four percent (three percent until 
July 16, 1991) state tax and any applicable local sales or use tax: 

(1) services rendered by pressing clubs, cleaning plants, hat blocking establishments, dry cleaning 
plants, laundries, including wet or damp wash laundries and businesses known as launderettes 
and laundcralls, and all similar type businesses; 

(2) the rental of clean linen, towels, wearing apparel and similar items; 

(3) soliciting cleaning, pressing, hat blocking and laundry; 

(4) rug cleaning services performed by persons operating rug cleaning plants or performed by any 
of the businesses named in this Rule when the rug cleaning service is performed at the plant; 
receipts from rug cleaning services performed at the customer's location by any of the businesses 
included in this Rule are not subject to sales and use tax; 

(5) charges for laundering or dry cleaning property owned by lessors which is held for lease or rental. 
Effective July 1, 1988, receipts derived from coin or token-operated washing machines, extractors and 
dryers are exempt from sales or use taxes. Retail sales of detergents, bleaches and other taxable items 
of tangible personal property through vending machines continue to be subject to the four percent 
(three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

(b) Charges by the businesses named in (a) of this Rule for alterations or storage of garments are not 
a part of the gross receipts subject to tax when such charges are separately stated on their invoices and 
in their records. When such charges are not separately stated, the total charge is subject to the four 
percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. Sales of 
thread, buttons, zippers, pockets, and other similar tangible personal property to such businesses for 
use or consumption in making repairs and alterations to garments being laundered, cleaned or pressed 
are subject to the four percent (three percent until July 16, 1991) state tax and any applicable local sales 
or use tax. 

(c) When in addition to the services named in Paragraph (a) of this Rule, the herein-named businesses 
make retail sales of tangible personal property for which a separate charge is made, such sales arc sub- 



889 6:13 NORTH CAROLINA REGISTER September 30, I99I 



FINAL RULES 



ject to the four percent (three percent until July 16, 1991) state tax and any apphcable local sales tax. 
Any charge for labor or services rendered in applying or installing such property are not subject to tax 
provided such charges are segregated from the charge for the tangible personal property sold on the 
invoice given to the customer at the time of the sale and in the vendor's records; otherwise, the total 
amount is subject to tax. 

(d) Receipts derived through persons engaged in soliciting laundering or cleaning business are not 
subject to the tax if such solicitor is a registered retailer and he pays to the department the four percent 
(three percent until July 16, 1991) state tax and any applicable local sales or use tax on the total gross 
receipts derived from the business solicited. 

History Note: Statutory Authority G.S. 105-164.4; 105-262; 
Eff. February I. 1976; 
Amended Eff. October I, 1991; August I, 1988. 

.4502 FUEL FOR LAUNDRIES: ETC. 

The gross receipts derived by a utihty from sales of electricity, other than receipts from the sale of 
electricity by a municipality whose only wholesale supplier of electric power is a federal agency and 
who is required by contract with that federal agency to make payments in lieu of taxes, and piped na- 
tural gas to laundries, dry cleaning plants and other users or consumers are subject to the three percent 
state rate of tax. The sales to the herein named businesses of other fuels for use in machinery used in 
the direct performance of the laundering or pressing and cleaning ser\'ices are subject to the one percent 
rate of sales or use tax. Sales of fuel to such businesses for any other use or purpose are subject to the 
four percent (three percent untH July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1 , 1976; 
Amended Eff October 1, 1991; February I, 1986; May 1, 1985. 

.4503 EQUIPMENT AND SUPPLIES FOR LAUTsDRIES: ETC. 

(a) Sales to laundries, dry cleaning plants and similar businesses of machinery used in the direct per- 
formance of the laundering or the pressing and cleaning service and parts and accessories thereto are 
subject to the one percent rate of sales or use tax with a maximum tax of eighty dollars ($80.00) per 
article. The following items are subject to the one percent rate of tax with a maximum tax of eighty 
dollars ($80.00) per article when sold to the herein-named businesses: 

(1) washing machines, water heaters, water softener tanks, central control collection systems, 
pressing machines, marking machines, packaging machines, folding machines and similar clean- 
ing machines; 

(2) hydraulic fluids used in laundry and dry cleaning machinery; 

(3) boiler compounds used in boilers furnishing water or steam to the laundering, pressing or 
cleaning machinery; 

(4) steam hose leading directly from the boiler to the laundering and dry cleaning machinery; 

(5) press pads and covers for laundering and dry cleaning machinery; 

(6) baskets, hampers, casters, or other containers used between the laundering and cleaning proc- 
esses to transport or contain garments being laundered or cleaned; 

(7) carbon and carbon filters used for reprocessing cleaning compounds; 

(8) lint roUs and refills therefor; 

(9) conveyors used to transport garments along the laundering, cleaning, and pressing Une during 
the process but not conveyors used before the laundering, cleaning, and pressing process begins 
or after it has been completed; 

(10) boiler room machinery, including valves, fittings and water pumps; 

(11) transformers located on or adjacent to motors which power machinery used in the direct per- 
formance of laundering and cleaning services. 

(b) The following items are not classified as laundering, pressing or dry cleaning machinery or parts 
and accessories thereto and are, therefore, subject to the four percent (three percent until July 16, 1991) 
state tax and any applicable local sales or use tax when sold to the herein-named businesses: 

(1) coin operated musical devices, amusement devices, coin changers, vending machines and repair 
or replacement parts for such machines; 

(2) baskets, hampers, casters, or containers used for general purposes such as to pick up soiled 
garments or deUver clean garments; 



6:13 NORTH CAROLINA REGISTER September 30, 1991 890 



FINAL RULES 



(3 
(4 
(5 

(6 

(7 
(8 

(9 
(10 
(11 
(12 
(13 
(14 



(16 

(17 

(1 

(19 



smoke stacks, including the steel ladders attached thereto; 

wiring used in the general wiring system and the transformers used in connection therewith; 

sewing machines used in repairing or altering the customers' property and the replacement or 
repair parts to such machines; 

tailoring supplies such as buttons, threads and zippers for use in repairing or altering garments 
for which no charge is made to the customer; 

letterheads, monthly reports, envelopes and other ofTice supplies; 

protective clothing for employees such as rubber gloves, aprons, protective shoes, etc. whether 
paid for by the employer or the emplc>yee; 

steam hose or pipe used in the general heating system; 

janitonal supplies; 

office furniture, fixtures and equipment, including cash registers; 

uniforms for employees; 

advertising materials; 

structural or buUdmg materials, supplies, fixtures and equipment which shall become a part of 
or be annexed to any building or structure being erected, altered or repaired; 

equipment used in the storage process to revitalize furs; 

conveyors used before or after the laundering, pressing and cleaning process to transp>ort gar- 
ments but not those used to move the garments along the laundering, pressing and cleaning line; 

lubricants used in laundering, pressing, or cleaning machines. 

transformers used in connection with general wiring and power supply; 

water softener chemicals. 



History \ote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1, 1976; 
Amended Eff. October I, 1991; January I, I9S2. 

.4506 G.\R.MENT REP.\IRS AND STORAGE 

Charges by commercial laundries and dry cleaners for repairs, alterations and storage of garments are 
not subject to sales tax when such charges are separately stated on the invoice given to the customer 
and in the vendor's records. Sales of buttons, thread, zippers, and cloth for pockets and similar items 
to such businesses for use or consumption in repairing, altering or stonng the customers' profverty are 
subject to the four percent (three percent untU July 16, 1991) state tax and any applicable local sales 
or use tax. 

History Sote: Statutory Authority G.S. 105-164.3; 105-164.4; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.4509 LAIFOR.M RENTALS 

Uniform rental businesses are not soliciting laundry or cleaning but are soliciting rental business for 
themselves. The total charge to such businesses by commercial laundries and dry cleaners for 
laundering or dry cleaning articles of tangible personal property which are to be leased or rented are 
subject to the four percent (three percent until July 16, 1991] state tax and any applicable local sales 
or use tax. 

History Sote: Statutory Authority G.S. 105-164.4; 105-262; 
Eff February' 1, 1976: 
Amended Eff October 1. 1991. 

SECTION .4600 - .MOTOR VEHICLES AND BOATS 



.4601 SALES AND PURCHASES OF AUTO.MOBILES .\ND OTHER MOTOR VEHICLES 

(a) The Sales and Use Tax Article was amended, effective October 1, 1989, to provide an exemption 
from sales and use taxes for sales of motor vehicles, the separate sales of a motor vehicle body and a 
motor vehicle chassis when the body is to be mounted on the chassis, and the sale of a motor vehicle 
body to be mounted by the manufacturer thereof on a motor vehicle chassis that temporarily enters the 
state for that purpose. Effective July 1, 1991, motor vehicle bodies mounted upon motor vehicles 



891 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



chassis that were titled and registered before the body was installed thereon are subject to the four 
percent (three percent until July 16, 1991) state tax and any applicable local sales or use tax. 
Prior to October 1, 1989, sales of motor vehicles, as defined in Paragraph (b) of this Rule, to users or 
consumers were subject to the two percent rate of tax with a maximum tax of three hundred dollars 
($300.00) applicable to the sale of any one motor vehicle. The tax was to be computed on the gross 
sales price of the motor vehicle less any allowance for a motor vehicle taken in trade as a credit or part 
payment on the sales price thereof. The gross sales price of the motor vehicle included any parts or 
accessories installed thereon at the time of the sale, labor for installing such parts or accessories, freight 
and any other charges for preparing the vehicle for sale. Parts or accessories sold separately from the 
sale of a motor vehicle are subject to the four percent (three percent untU July 16, 1991) state tax and 
any applicable local sales or use tax; however, charges for labor to install such parts or accessories are 
not subject to tax when separately stated on the customer's invoice and in the vendor's records. 
Prior to October 1, 1989, separate sales of a new motor vehicle chassis and a new motor vehicle body 
to be installed thereon, whether sold by the same or different retailers, were subject to the maximum 
tax on sales of motor vehicles. Such sales are treated as a single sale. Retailers making sales of this 
nature must retain in their permanent records evidence of the amount of tax paid on the purchase of 
a new body or chassis and compute the amount of additional tax to be charged by determining the 
difference between the tax already paid and the amount of tax due on the combined selling price of such 
body and chassis subject to the maximum tax. When a new motor vehicle body was sold to be installed 
on a used motor vehicle chassis, the tax was to be computed on the sales price of the new motor vehicle 
body, subject to the ma.ximum tax without regard to any tax pre\iously paid on the used chassis. 
Effective July 1, 1991, G.S. 105-164.13(32) was rewritten to exempt the sale of a motor vehicle body 
to be mounted on a motor vehicle chassis when the certificate of title has not been issued for the chassis. 
Motor vehicle bodies mounted upon motor vehicle chassis that have been previously titled and regis- 
tered will be subject to the state rate of three percent or four percent plus the applicable local sales tax. 
Prior to October 1, 1989, the lease receipts derived from the lease or rental of a motor \ehicle to a user 
or consumer in this state were subject to the two percent sales or use tax. The maximum tax of three 
hundred dollars ($300.00) was applicable to the receipts derived from the lease or rental of a motor 
vehicle for a stipulated period of time. Persons who leased or rented motor vehicles were to collect and 
remit the tax on the separate retail sale of a motor vehicle in addition to the tax imposed on the lease 
or rental of the motor vehicle. 

(b) Motor Vehicle defined; For the purposes of the Sales and Use Tax Article, the term motor ve- 
hicle means a vehicle that is designed primarily for use upon the higliways and is either self-propelled 
or propelled by a self-propelled vehicle, but does not include: 

(1) a moped as defined in G.S. 20-4.01(27)(dr); 

(2) special mobile equipment as defmed in G.S. 20-4.01(44); 

(3) a tow dollv that is exempt from motor vehicle title and registration requirements under G.S. 
20-51(10) or (11); 

(4) a farm tractor or other implement of husbandry; 

(5) a manufactured home; or 

(6) road construction or road maintenance machinery or equipment. 

(c) Special Mobile Equipment Defined: Every truck, truck-tractor, industrial truck, trailer, or semi- 
trailer on which have been permanently attached cranes, miUs, well-boring apparatus, ditch digging 
apparatus, air compressors, electric welders or any similar type apparatus or which have been converted 
into living or office quarters, or other self-propelled vehicles which were originally constructed in a 
similar manner which are operated on the highway only for the purpose of getting to and from a non- 
highway job and not for the transportation of persons or property or for hire. This shall also include 
trucks on which special equipment has been mounted and used by the ^Vmerican Legion or Shrine 
Temples for parade purposes, trucks or vehicles pri\'ately owned on which fue-fighting equipment has 
been mounted and which are used only for fire-fighting purposes, and \ehicles on which are perma- 
nently mounted feed mixers, grinders, and mills although there is also transported on the vehicle 
molasses or other similar type feed additives for use in connection with the feed-mixing, grinding or 
milling process. 

(d) Prior to October 1, 1989, the sales or use tax was to be computed on the gross sales price of a 
motor vehicle less any allowance for a motor vehicle taken in trade as a part of the consideration for 
the purchased vehicle. Prior to October 1, 1989, sales of all motor vehicles accepted in trade or re- 
possessed by vendors were subject to sales or use tax regardless of the fact that such motor vehicles 
may have been acquired by trade or repossessed by vendors. Prior to October 1, 1989, when property, 
other than motor vehicles, w-as taken in trade as a pail of the consideration for a purchased vehicle, the 



6:li NORTH CAROLINA REGISTER September iO, 1991 S92 



FINAL RULES 



sales or use tax was to be computed and paid on the full gross sales price of the motor vehicle without 
any deduction whatever on account of any trade-in credit or allowance. The sale of used property, 
other than a motor vehicle, by the dealer who accepted same in trade would then be exempt from tax. 
Effective October 1, 19S9. motor vehicles are exempt from sales and use taxes and the sale of used 
property, other than a motor vehicle, taken in trade as a part of the consideration for the purchased 
vehicle is subject to sales tax. Repair parts withdrawn from inventor)' by a dealer and installed upon 
such property for sale are not subject to the tax. Certificates of resale may be executed by registered 
dealers when purchasing repair parts for resale or for use in reconditioning such property for sale. 

(e) Prior to October 1, 1989, sales of motor vehicles to a registered merchant for resale were not 
subject to tax when supported by properly executed Resident and Nonresident Retail or Wholesale 
Merchant's Certificate of Resale, Form E-590, or other evidence in writing adequate to support the 
conclusion that he was registered with the Department of Revenue or in a taxing jurisdiction outside 
this state for sales and use tax purposes and that the property was being purchased for the purpose of 
resale. Certificates of resale may also be executed by registered motor vehicle leasing firms when pur- 
chasing motor vehicles which they will lease or rent to their customers since such firms must remit tax 
on their lease or rental receipts. Prior to October 1, 19S9, sales of motor vehicles to out-of-state mer- 
chants who accept deliver)' of the vehicles in this state for resale in their respective states are not subject 
to tax provided such merchants are registered for sales and use tax purposes in a ta.xing jurisdiction 
outside this state and furnish the North Carolina merchant a properly completed certificate of resale. 
Reference is made to 17 NC.AC 7B .3201 for further information regarding sales to nonresident mer- 
chants. 

(f) Prior to October 1, 1989, sales of motor \'ehicles to nonresident purchasers which were delivered 
to them in North Carolina for immediate transportation to and use in another state in which such ve- 
hicles are required to be registered were not subject to sales tax. For the purpose of the exemption, the 
term "immediate transportation to . . . another state" means to either drive or transport the vehicle 
outside North Carolina en route to its state of registration within se\enty-two hours after the purchase 
thereof: however, purchases of motor vehicles by military personnel for use in North Carolina are tax- 
able notwithstanding that such persons might have registered the motor vehicles in their home states. 
The seOer must have obtained from the purchaser and furnished to the Secretary of Revenue an Affi- 
davit for Exemption of Motor Vehicle Sold for Immediate Transportation and Use Outside of North 
Carolina, Form E-599B, stating the name and address of the purchaser, the state in which the \'ehicle 
will be registered and operated, the make, model, and serial number of the vehicle, and such other in- 
formation as the Secretar)' may require. The exemption was full)' allowed when the alfida\it was filed 
with the seller's sales and use tax report for the month during which the sale was made and such report 
was timely filed. WTien an affidavit concerning a sale of a motor vehicle to a nonresident purchaser 
was not filed with the retailer's sales and use tax report for the month in which the sale of the vehicle 
was made and the failure to file the affidavit is discovered on or after August 12, 1989, it shall be ac- 
cepted if it is filed within 30 da\ s after such disco\er)', but no refund shall be made of sales and use taxes 
already paid. .-Vn affidavit filed within this 30-day period is subject to a penalty of 25 percent of the tax 
applicable to the sales price of the motor vehicle. If the affidavit is submitted to the Secretar)' of Re- 
venue after the end of this 30-day period, no exemption shall be allowed. The provisions of this Par- 
agraph are not applicable to sales of motor vehicles which are subject to the hiahwav use tax after 
September 30, 1989. 

Histon Sole: Statutoiy Authority G.S. J 05-/ 64.4; 1 05- 1 64.5; / 05- 164.6; 105-164.13; 105-262; 
Eff. Febman- I, 1976; 
Amended Eff. October I. 1991; July I, 1990; February I. I98S; March I. 1987. 

.4602 .\IRCR.\FT: BOATS: R AILW.AV CARS: LOCOMOTI\ ES: .MANLFACTLRED HOMES 

(a) Effective August 1, 1989, the maximum sales tax on retail sales of aircraft, boats, railway cars or 
locomotives increased from three hundred dollars ($300.00) to fifteen hundred dollars ($1,500.00). The 
rate of tax applicable to such sales of aircraft, boats, railway cars or locomotives three percent (two 
percent until July 16, 1991) state tax and is payable to the Secretar)' of Re\enue on \endors' sales and 
use tax reports. 

Effective October 1, 1989, the term "motor vehicle", as set forth under G.S. 105-164.3(8b), excludes a 
manufactured home. G.S. 105- 164.3(Sa) defines a "manufactured home" as a structure that is designed 
to be used as a dwellmg and: 

(1) Is built on a permanent chassis: 

(2) Is transportable in one or more sections; 



893 6.13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



(3) When transported, is at least eight feet wide or 40 feet long; and 

(4) When erected on a site, has at least 320 square feet. 

Retail sales of manufactured homes will continue to be subject to the two percent rate of sales tax with 
a maximum tax of three hundred dollars ($300.00) per article including all accessories attached to the 
manufactured home when it is delivered to the purchaser. Each section of a manufactured home that 
is transported to the site where it is to be erected is a separate article. Dealers must continue to remit 
sales tax to the Secretary' of Revenue on their retail sales of manufactured homes. 

(b) A retail sale of a boat with a boat trailer is considered to be the sale of two separate articles. The 
retail sale of the boat trailer, a motor vehicle within the meaning of the statute, is subject to the three 
percent highway use tax with a maximum tax of one thousand dollars ($1,000.00) applicable to the 
trailer. The retail sale of the boat is subject to the three percent (two percent until July 16, 1991) rate 
of tax with a maximum tax of fifteen hundred doUars ($1,500.00) applicable to the sale of any boat 
except for those sales exempt from tax under the provisions of G.S. 105-164.13(9). The tax shall be 
computed on the gross sales price of the boat, including charges for the boat motor, fenders, boat and 
motor controls, compasses, windshields, horns, lights, or any other parts or accessories, all of which 
must be attached thereto at the time of deliver}' to the purchaser, labor for installing such parts and 
accessories, freight or any other charge for preparing the boat for sale. Life jackets, life rings, cushions, 
flares, frre extinguishers and rope are considered to be safety equipment rather than accessories to the 
boat and sales of such items at retail are subject to the four percent (three percent until July 16, 1991) 
state tax and any applicable local sales or use tax notwithstanding they are sold with the boat. Parts 
and accessories, including boat motors, fenders, boat ;ind motor controls, lights, windshields, horns and 
other above-named items sold separately from the sale of a boat are also subject to the four percent 
(three percent until July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. February 1, 1976; 
Amended Eff. October 1. 1991; July 1, 1990; January 3, 1984; May 11, 1979. 

.4603 MOTOR VEHICLE SERVICE BUSINESSES 

(a) Persons engaged in the business of repairing automobiles and other motor vehicles are liable for 
coUecting and remitting the four percent (three percent untU July 16, 1991) state tax and any applicable 
local sales or use tax on the sales price of any parts, accessories or other tangible personal property 
which they furnish in connection with repairing their customers' vehicles. Charges for labor to install 
the parts, accessories and similar property are not subject to tax if such charges are separately stated 
on the customers' invoices and in the vendor's records; otherwise, the total charges are subject to the 
tax. 

(b) Sales of repair parts, accessories and other tangible personal property to automotive repair shops 
for resale in connection with repairing their customers' vehicles are not subject to tax when supported 
by certificates of resale, Form E-590. 

(c) Sales of tools, equipment and supplies to automotive repair shops for use in conducting their 
business are subject to the four percent (three percent until July 16, 1991) state tax and any applicable 
local sales or use tax and vendors making such sales are required to coUect and remit same. Certificates 
of resale are not applicable to sales of this nature. If, in addition to repairing motor vehicles, a repair 
shop actually makes sales of tools, equipment, supplies, and similar items to its customers, such repair 
shop may purchase such items under a certificate of resale. Vendors selling tools, equipment, supplies 
and similar items to a repair shop, or similar business which does not ordinarily and customarily engage 
in reselling such articles at retail should require from such vendee a certificate of resale with each order 
for such articles. Such vendee is then liable for collecting and remitting the three percent tax on its sales 
of tools, equipment, supplies and similar items. 

(d) The total charge for all tangible personal property, including windshields, window glass, seat 
covers, floor mats, head liners, runners, channels, pig rings, felt, tacks, screws, thread, tape, windlace, 
welt cord, and similar items installed in or upon motor vehicles or other articles by persons selling and 
installing such property are subject to the four percent (three percent until July 16, 1991) state tax and 
any applicable local sales or use tax. The charge for labor performed or other services rendered in in- 
stalling the same are also subject to the four percent (three percent until July 16, 1991) state tax and 
any applicable local sales or use tax unless such charges are separately stated on the customer's invoice 
and the vendor's records. All tax due hereunder must be collected and remitted to the department by 
the person selling and performing such installation sen-ice. Sales of tangible personal property for resale 
m connection with glass repair and reupholster\- jobs are not subject to tax when supported by properly 



6:li NORTH CAROLINA REGISTER September iO, 1991 S94 



FINAL RULES 



executed certificates of resale; however, any tools, supplies or other property sold for use in performing 
such work are subject to the four percent (three percent until July 16, 1991) state tax and any apphcable 
local sales or use tax. 

(e) Persons engaged in the business of painting or refinishing motor vehicles are the users or con- 
sumers of tangible personal property which they purchase for use in the performance of such services. 
Sales to such businesses of paint and other refinishing materials, tools, supplies and any other tangible 
personal property for use in body repair, painting or refinishing work are subject to the four percent 
(three percent until July 16, 1991) state tax and any applicable local sales or use tax. If in addition to 
such body repair, painting or refinishing work, said businesses purchase tangible personal property such 
as automobile fenders, doors, windshields or other parts or accessories, and sell the same to their cus- 
tomers, such businesses are liable for collecting and remitting the tax on such sales irrespective of 
whether the sales are made in connection with repair or refinishing jobs. 

History Note: Statutory Authority G.S. 105-164.3; 105-164.4; 105-164.5; 105-164.6; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991. 

.4604 SPECIAL EQl IP.MENT-ACCLSSORIES: MOTOR VEHICLES 

(a) Effective October 1, 1989, retail sales of motor vehicles, including all accessories attached to the 
vehicles when delivered to the purchaser, are exempt from sales tax. Prior to October 1, 1989, retail 
sales of motor vehicles with special accessories such as puUing devices, hole digging devices, aerial 
working devices or other special accessories which are attached to and a part of such motor vehicles 
when they are delivered to purchasers are subject to the two percent rate of tax with a maximum tax 
of three hundred dollars ($300.00) applicable to each such vehicle. The term "motor vehicle", as used 
in this Rule, means a vehicle that is designed primarily for use upon the highways and is either self- 
propeUed or propelled by a self-propelled \ehicle, but does not include: 

( 1) a moped as defmed m G.S. 20-4.01(27)(dl); 

(2) special mobUe equipment as defmed in G.S. 20-4.01(44); 

(3) a tow dollv that is exempt from motor vehicle title and registration requirements under G.S. 
20-51(10) or (11); 

(4) a farm tractor or other Implement of husbandry; 

(5) a manufactured home; or 

(6) road construction or road maintenance machinery or equipment. 

(b) Persons selling such special equipment or accessories at retail which they mount upon a motor 
vehicle chassis or body belonging to others must collect and remit the three percent state and two 
percent county sales or use tax thereon. Any charges for labor or services rendered in Installing or 
applying such items are not subject to tax pro\ided such charges are segregated from the charge for the 
tangible personal property sold on the invoice given to the customer at the time of sale and in the 
vendor's records; otherwise the total amount is subject to tax. 

irL<,torv \'ote: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February I, 1976; 
Amended Eff October I. 1991; July /, 1990; December I, 1988. 

.4609 FIRE TRUCKS AND EQUIPMENT 

(a) Prior to October 1, 1989, sales of fire trucks to municipalities, counties and rural fire protection 
districts organized under Chapter 69 of the North Carolina General Statutes were taxable at the rate 
of two percent and the maximum tax of three hundred doUars ($300.00) was applicable with respect to 
any one fire truck including all accessories built into or affixed thereto by the manufacturer such as 
nozzles, hoses, hose reels, hose straps, hose clamps, hose connections, adapters, play pipes, ladders, 
tanks, booster pumps, pike poles, etc. 

(b) Retail sales of axes, brooms, buckets, shovels, ropes, general purpose tools, gas masks, first aid 
kits, blankets, portable pumps, portable fire extinguishers and hke articles are considered to be other 
fire fightmg equipment rather than accessories to the fire truck, and sales of such items at retail are 
subject to the four percent (three percent until July 16, 1991) state tax and any applicable local sales 
or use tax without any maximum tax applicable thereto notwithstanding such sales are made to the 
above type customers or that the items are sold with fire trucks. Privately owned fje trucks or vehicles 
on which fire fighting equipment has been mounted that are used only for fire fighting purposes are 
classified as special mobile equipment, and sales thereof are subject to the four percent (three percent 



895 6:13 NORTH CAROLINA REGISTER September 30, 1 99 1 



FINAL RULES 



until July 16, 1991) state tax and any applicable local sales or use tax. Sales of repair parts to munici- 
palities, counties, rural fu"e protection districts, and industrial users for use in repairing fire trucks are 
subject to the four percent (three percent until July 16, 1991) state tax and any applicable local sales 
or use tax. 

History Note: Statutory Authority G.S. J 05-/ 64.4; JOS- 164.6; / 05- 262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991; July I, 1990; January 3, 1984. 

.4614 PICKUP CAMPERS: TRAILERS 

Retail sales of camper trailers which are designed to run on the streets and highways and which are 
pulled by a self-propelled vehicle are properly classified as sales of motor vehicles and exempt from sales 
tax effective October 1, 1989. Retail sales of such camper trailers are subject to the highway use tax 
on and after October 1, 1989. Retail sales of shde-in pickup camper units are subject to the four per- 
cent (three percent untU July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutory Authority G.S. 105-164.4; 105-/64.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October I, 1991; October 1, 1990; July 1, 1990. 

.4615 MANUFACTURED HOMES 

(a) Prior to October 1, 1989, the retail sale of a manufactured home designed to run upon the streets 
and highways, when pulled by a self-propelled vehicle was classified as a motor vehicle subject to the 
two percent rate of sales tax with a maximum tax of three hundred dollars ($300.00) per vehicle in- 
cluding all accessories attached thereto at the time of delivery to the purchaser. The tax was to be 
computed on the gross sales price less any allowance for a manufactured home or motor vehicle taken 
in trade as a part of the consideration for the purchased manufactured home. Effective October 1, 1989, 
the term "motor vehicle", as set out in G.S. 105-164.3, excludes a manufactured home. A "manufac- 
tured home" is defmed as a structure that is designed to be used as a dwelling and; 

(1) Is built on a permanent chassis; 

(2) Is transportable in one or more sections; 

(3) When transported, is at least eight feet wide or 40 feet long; and 

(4) When erected on a site, has at least 320 square feet. 

Retail sales of manufactured homes will continue to be subject to the two percent rate of sales tax with 
a maximum tax of three hundred doUars ($300.00) per article including all accessories attached to the 
manufactured home when it is delivered to the purchaser. Each section of a manufactured home that 
is transported to the site where it is to be erected is a separate article subject to the two percent rate 
of sales or use tax with a maximum tax of three hundred dollars ($300.00) applicable thereto. Effective 
October 1, 1989, the tax is to be computed on the gross sales price of the manufactured home without 
any deduction whatever on account of any trade-in credit or allowance. The gross sales price of the 
manufactured home includes any parts or accessories installed thereon at the time of the sale and de- 
liven,' to the customer, labor for instalUng such parts or accessories, freight, or any other charges for 
preparing the manufactured home for sale. Parts or accessories sold separately from the sale of a 
manufactured home are subject to the four percent (three percent until July 16, 1991) state tax and any 
apphcable local sales or use tax; however, charges for labor to install such parts or accessories are not 
subject to tax when separately stated on the customer's invoice and in the vendor's records. 

(b) Any furniture, appliances or accessories placed in a manufactured home by the manufacturer or 
the dealer and which are a part of the sale and delivery of the manufactured home to a customer are 
included in the gross sales price of the manufactured home, subject to the two percent rate of tax with 
a maximum tax of three hundred dollars ($300.00) applicable to the sale. Anchor bolts, tie-downs, 
skirting, steps, and central or window air-conditioning units that are to be attached to a manufactured 
home and that are a part of the sale of a manufactured home at the time of delivery to the customer 
or at the time of installation by a dealer for his customer are included in the sales price subject to the 
two percent rate of tax with a maximum tax of tliree hundred dollars ($300.00) applicable to the sale 
of each manufactured home. 

(c) Any charge made by a vendor to a customer for running gear upon which a manufactured home 
is delivered is a part of the gross sales price of such manufactured home subject to the two percent rate 
of tax, with a maximum tax of three hundred doUars ($300.00), notwithstanding that such charge may 
be separately stated from the charge for the manufactured home on the invoice given to the customer 



6:13 NORTH CAROLIN.4 REGISTER September 30, 1 99 1 S96 



FINAL RULES 



at the time of the sale. The return of running gear to a dealer for credit or refund of such charge does 
not alter the rate of tax applicable to the sale, and the customer is not entitled to a credit or refund of 
the tax paid on the charge for the running gear returned or sold to the dealer. 

(d) Any sale of furniture, appliances and other accessories to a customer by a dealer after the sale of 
the manufactured home has been consummated is subject to the four percent (three percent until July 
16, 1991) state tax and any applicable local sales or use tax. Cement blocks which are used to prepare 
or build the foundation for or to level a manufactured home, the sewer pipe used to connect a manu- 
factured home to the septic or sewer system, and wedges used for leveling a manufactured home do not 
come within the defmition of accessories attached at the time of delivery and, therefore, purchases of 
these items by dealers or other users or consumers in this state to be used in the installation of a 
manufactured home are subject to the four percent (three percent until July 16, 1991) state tax and any 
apphcable local sales or use tax. 

Histon' h'ote: Statutory Authority G.S. 105-164.4: 105-164.6: 105-262; 
Eff. February 1. 1976; 
Amended Eff. October /. 1991: July I, 1990: January 3. 1984; July 5, 1980. 

.4618 MOrOR \ EHICLE SUPPLIES 

(a) A motor vehicle dealer is the user or consumer of wax and other refmishing materials used in the 
preparation of new or used automobiles for sale and is therefore liable for remitting the four percent 
(three percent until July 16, 1991) state tax and any applicable local sales or use tax thereon. 

(b) Sales of masking tape to auto and body repair shops for use in stripping automobiles in the 
painting process are subject to the four percent (three percent until July 16, 1991) state tax and any 
apphcable local sales or use tax. 

History Xote: Statuton' Authority G.S. 105-164.4; 105-164.6: 105-262; 
Eff February 1. 1976; 
Amended Eff October 1. 1991. 

.4619 HIGmVAY USE TAX 

(a) Effective October 1, 1989, retail sales of motor vehicles are exempt from sales tax and subject to 
the three percent highway use tax under yVrticle 5A of Chapter 105 of the General Statutes with a 
minimum tax of forty dollars ($40.00) applicable thereto, with certain exceptions, and a maximum tax 
of one thousand dollars ($1,000.00) on any one motor vehicle increasing to fifteen hundred dollars 
($1,500.00) July 1, 1993. The highway use tax must be paid to the Commissioner of Motor Vehicles 
by the dealer, the purchaser, or other apphcant for a certificate of title at the time of making application. 
The basis for the tax on sales of motor vehicles by retailers wiU be the sales pnce of the motor veliicles 
including aU accessories attached thereto at the time of delivery of the vehicles to the purchasers less the 
amount of any allowance given by the retailer for motor vehicles taken in trade. 

The basis for the tax on sales of motor vehicles for which a certificate of title is issued because of a sale 
of the vehicle by the seller who is not a retailer is the market value of the vehicle, less the amount of 
any allowance given by the seller for a motor vehicle taken in trade for the purchased motor vehicle. 
The retail value of a motor vehicle for which a certificate of title is issued because of a reason other than 
the sale of the motor vehicle is the market value of the vehicle. The market value of the vehicle is 
presumed to be the value of the vehicle set forth in a schedule of values adopted by the Commissioner 
of \Iotor Vehicles not to exceed the wholesale value. 

(b) The statute provides that the highway use tax will not be apphcable to motor vehicles deUvered 
to purchasers on or after October 1, 1989, pursuant to written contracts of sale entered into before that 
date, but they will be subject to the sales tax at the rate of two percent with the three hundred dollars 
($300.00) maximum tax per vehicle. The highway use tax wiU not be applicable to the transfer of a 
motor vehicle to: 

(1) the insurer under G.S. 20-109.01 of the Motor Vehicle Laws because the vehicle is a salvage 
vehicle; 

(2) to either a manufacturer, as defmed in G.S. 20-285, for resale; or 

(3) to a motor vehicle retailer for the purpose of resale. Only the minimum tax of forty dollars 
($40.00) will be imposed when a certificate of title is issued as a result of the transfer of a motor 
vehicle: 

(A) by a gift between a husband and wife or a parent and child; 

(B) by wiU or intestacy; 



897 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



(C) by a distribution of marital property as a result of a divorce; 

(D) to a secured party who has filed a security interest in the motor vehicle with the Department 
of the Secretary of State; 

(E) to a partnership or corporation as an incident to the formation of the partnership or corpo- 
ration and no gain or loss arises on the transfer under section 351 or section 721 of the Internal 
Revenue Code, or to a corporation by merger or consolidation in accordance with G.S. 55-1 10; 
or 

(F) to the same owner to reflect a change in the owner's name. 

WTien a purchaser of a motor vehicle returns the vehicle to the seUer within 90 days after the purchase 
of the vehicle and receives a motor vehicle replacement or a refund of the purchase price paid to the 
seller, the purchaser may obtain a refund of the tax paid on the certificate of title issued for the returned 
vehicle less the minimum tax of forty dollars ($40.00) by submitting an application for refund to the 
Commissioner of Motor Vehicles. 

(c) G.S. 105-187.5 provides that, effective October 1, 1989, lessors of motor vehicles may elect to pay 
the highway use tax to the Commissioner of Motor Vehicles when applying for a certificate of title for 
a motor vehicle purchased by the retailer for lease or rental or may elect to collect and remit the tax to 
the Secretary of Revenue on the lease or rental receipts derived therefrom. Effective April 23, 1991, 
G.S. 105-187 was amended by adding Section 1 1 which allows lessors of motor vehicles the option of 
paying the highway use tax to the Commissioner of .Motor Vehicles rather than the alternate gross re- 
ceipts tax to the Secretary of Revenue on motor vehicles held in their inventory for lease prior to Oc- 
tober 1, 1989, and leased or rented on or after that date. To make the election allowed by this Section, 
a retailer must complete a form provided by the Division of Motor Vehicles. That Division will notify 
the Secretary of Revenue of a retailer who makes an election under this Section. If this election is 
made, no credit will be allowed for any tax paid on the purchase or rental of a motor vehicle under the 
Sales and Use Tax Law and for any tax paid on gross receipts under the Highway Use Tax Act. The 
taxes collected under this Section will be credited to the General Fund. 

Effective October 1, 1989, the rate of highway use tax on motor vehicle lease or rental receipts will be 
eight percent for the first 90 continuous days of lease or rental of a vehicle to the same person, and the 
rate will reduce to three percent for the remainder of the continuous period during which the vehicle 
is leased or rented to that person. The maximum tax applicable to the sale of a motor vehicle apphes 
when the vehicle is leased or rented to the same person for more than 90 continuous days and the tax 
paid by a person from the first day of such period applies toward the maximum tax. Effective July 1, 
1991, the Highway Use Tax Act was amended to define long-term and short-term lease or rental. 
Long-term lease or rental means a written agreement to lease or rent property for at least 365 contin- 
uous days to the same person. Short-term lease or rental is a lease for less than 365 continuous days. 
The rate of tax on the gross receipts from the short-term lease or rental of a motor vehicle is eight 
percent and the tax rate on the gross receipts from the long-term lease or rental of a motor vehicle is 
three percent. The maximum tax applies to a continuous lease or rental of a motor vehicle to the same 
person. A retailer who elects to pay tax to the Secretary of Revenue on the gross receipts from the lease 
or rental of a motor vehicle must make this election when applying for a certificate of title for the ve- 
hicle. To make the election, the retailer must complete a form provided by the Division of .Motor 
Vehicles. Once made, an election is irrevocable. The eight percent rate of tax will be deposited in the 
General Fund. The three percent rate of tax will be deposited to the Highway Trust Fund. Separate 
forms for reporting the separate rates of tax on motor vehicle lease receipts will be provide by the De- 
partment of Revenue to motor vehicle lessors upon receipt of their request for such forms. 

(d) G.S. 105-187. 5(d) was rewritten to authorize the Secretary of Revenue to administer the tax im- 
posed on the gross receipts from the lease or rental of motor vehicles in the same maimer as the tax 
levied under G.S. 105- 164.4(a)(2). The administrative provisions and powers of the Secretary that ap- 
ply to the tax levied under G.S. 105- 164.4(a)(2) apply to the tax imposed on the gross receipts from the 
lease or rental of motor vehicles. The Division of Motor Vehicles may request the Secretary to audit 
a retailer who elects to pay tax on gross receipts under this Section and the Division of \Iotor Vehicles 
shall reimburse the Secretary for the cost of the audit, as determined by the Secretar>'. In conducting 
an audit of a retailer under this Section, the Secretary may audit any sales of motor vehicles made by 
the retailer. 

History Note: Statutory Authority G.S. /05-1S7.3; 105-187.4; 105-187.5: 105-187.6; 105-1S7.8; 
105-187.9; 105-262; 
Eff. October I, 1990; 
Amended Eff. October 1, 1991. 



6:13 NORTH CAROLINA REGISTER September 30, 1991 S9<S 



FINAL RULES 



SKCTION .4700 - PRINTERS AND NEWSPAPER OR MAGAZINE PUBLISHERS 



.4701 IN GENERAL 

(a) All retail sales of tangible personal property by commercial printers or publishers are subject to 
the four percent (three percent until July 16, 1991) state tax and any applicable local sales or use ta.x 
unless such sales are subject to a lesser rate of tax under the pro\isions of G.S. 105-164.4(1) or are ex- 
empt by statute. The following sales are exempt from sales or use tax: 

( 1 ) charges for ad\'ertising space in newspapers, magazines and other publications: 

(2) sales of newspapers by newspaper street vendors and by newspaper carriers making door to door 
deliveries and sales of magazines by magazines vendors making door to door sales; 

(3) charges made by printers for imprinting or binding books or forms or other similar items which 
are owned by their customers: 

(4) sales to manufacturers, producers, wholesalers and retailers of wrapping paper, labels, bags, car- 
tons and other similar items when such items are used for packaging, shipping, or delivering 
tangible personal property sold at wholesale or retail, and when such items constitute a part of 
the sale of such tangible personal property and are delivered with it to the customer; 

(5) effective July 20. 1983. sales of advertising supplements and any other printed matter ultimately 
to be distributed v\ ith or as a part of a newspaper; 

(6) effective October 1, 1985, sales of paper, ink and other tangible personal property to commercial 
printers and commercial publishers for use as ingredient or component parts of free circulation 
publications, and sales by printers of free circulation publications to the publishers of these 
pubhcations. As used in this Rule, the term "free circulation publications" means shoppers' 
guides that: 

(A) are published on a periodic basis at recurring intervals; 

(B) are mailed or distributed house-to-house, by street distributors, in racks, or in any other 
manner at other locations without charge to the recipient; 

(C) contain advertising of a general nature for the sale of goods and sen. ices by a variety of busi- 
nesses, trades or industries and are not limited to advertising the sale of goods or services by a 
particular business, trade or industry: and 

(D) make space available to all ad\erti5ers for the purpose of inducing readers to purchase the 
goods and services. of the ad\'ertisers. 

The term does not include house organs or trade, professional, or similar types of publications. 
The ratio of news to ad\ertising in a publication is not a factor in determining whether the 
publication is a free circulation publication. 

(7) effective July 1, 1983, printed material which is sold by a printer to a purchaser within or without 
this state is exempt from sales or use tax when such printed material is delivered in this state by 
the printer to a common carrier or to the United States Postal Service for dehven,' to the pur- 
chaser or the purchaser's designees outside this state, if the purchaser does not thereafter use the 
printed material in this state. Printed material which is sold by a printer to a purchaser within 
or without this state is exempt from sales or use tax when the printed material is delivered by 
the pnnter directly to a mailmg house or to a common earner or to the United States Postal 
Ser\ ice for delivery to a maihng house in this state which will preaddress and presort the material 
and deliver it to a common carrier or to the United States Postal Service for deliver,' to recipients 
outside this state designated by the purchaser. 

(A) Sales of printed material by a printer located within or without this state which is delivered 
directly to the purchaser in this state for the original purpose of preparing and delivering the 
printed material to the L'nited States Postal Service or a common carrier for delivery to pro- 
spective customers or other recipients outside this state are exempt from sales and use tax pro- 
vide such purpose is consummated. A purchaser of such printed material for preparation and 
deli\'ery to prospective customers and other recipients outside this state must furnish the vendor 
a written statement certifying that the pnnted material is being purchased for use in a mailing 
program which is in place at the time of purchase; otherwise, the vendor must coUect and remit 
the tax on such sales. Sales of printed materials to a user or consumer in this state to be placed 
in the purchaser's inventor,' for use as needed are subject to sales or use taxes notwithstanding 
that all or a portion of the printed material may be deli\ered to the United States Postal Service 
or a common carrier for deliven' to prospective customers or other recipients outside tliis state. 



S99 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



(B) A printer who sells printed material which is delivered to an in-state or out-of-state purchaser 
at a point within this state or which is delivered to a common carrier or the United States Postal 
Service for delivery to the purchaser at a point within this state who prepares the material to be 
mailed to prospective customers or other recipients without charge and transports the material 
outside this state to be delivered to the United States Postal Service or a common carrier or to 
a mailing house outside this state for deliver)' to designated recipients is liable for sales or use tax 
except as provided herein. 

(C) The sale of printed materials by vendors other than printers and other types of tangible per- 
sonal property which is provided without charge to recipients, whether it be advertising materials 
or gifts or donations, are subject to sales or use tax even though the items in question may be 
mailed to designated recipients outside this state. For example, a purchaser in this state buys 
tangible personal property other than printed material from a printer which is given to a donee 
within or without this state and directs that the item can be shipped or mailed to the donee. 
This transaction is subject to sales or use tax. 

(b) Retail sales of advertising circulars, catalogues, booklets, pamphlets, forms, tickets, letterheads, 
envelopes and similar items and retail sales of books, magazines, periodicals, newspapers and other 
publications are subject to the four percent (three percent until July 16, 1991) state tax and any appli- 
cable local sales or use tax unless such sales are exempt from tax by statute. When publications, other 
than magazines, are sold by subscription, the tax accrues at the time the subscription is accepted. 

(c) Sales of paper, ink, and other tangible personal property to commercial printers or publishers for 
use as an ingredient or component part of the printed matter which they produce for sale are exempt 
from the tax. 

(d) Sales to commercial printers and publishers of machinery and equipment and parts therefor and 
accessories thereto for use directly in the production of newspapers, magazines and other printed matter 
for sale are subject to the one percent rate of tax with a maximum tax of eighty dollars ($80.00) per 
article. Included herein are custom made plates and dies when title thereto does not pass to the 
printers' customers. Sales to commercial printers and publishers of tangible personal property such as 
wood and metal which is used to fabricate plates and dies for use in the production of printed matter 
for sale are likewise subject to the one percent rate of tax when title to the plates and dies does not pass 
to the printers' customers. Sales to commercial printers and publishers of machinery, equipment, film, 
and similar items of tangible personal property for use or consumption directly in the production of 
such plates and dies are also subject to the one percent rate of tax. It is a printing trade practice that 
title to lithographic and gravure plates and dies is retained by the printer or publisher. ' Unless it is 
otherwise agreed in writing, the secretary will consider such items to be purchased by the printer or 
publisher for use or consumption and taxable at the one percent rate of tax on the cost price thereof. 

(e) Sales to commercial printers of custom made plates and dies for resale are exempt from sales or 
use tax when supported by certificates of resale. Form F^590. Sales to commercial printers of tangible 
personal property such as wood and metal which becomes a component part of printing plates 
produced by such printers for sale to customers are likewise exempt from sales or use tax when sup- 
ported by certificates of resale, form E-590. However, sales to commercial printers of machinery, 
equipment, film, and similar items of tangible personal property which do not enter into or become a 
component part of such plates and dies but are used or consumed by the printer in the direct pro- 
duction of such plates and dies are subject to the one percent rate of tax. When, at the request of the 
customer, commercial printers purchase custom made printing plates and dies for use in the direct 
production of the printed matter or when they purchase wood and metal which becomes a component 
part of printing plates and dies fabricated by the printer for use in the direct production of printed 
matter and title to the plates and dies passes to the printers' customers, such items can be properly 
purchased for resale. The printer is, of course, liable for collecting and remitting the four percent (three 
percent until July 16, 1991) state tax and any applicable local sales or use tax on the total retail sales 
price of such plates and dies including charges for tangible personal property and art work or any other 
services that go into the manufacture or delivery thereof In such cases, the printer's sales invoices and 
records must show that the plates and dies are actually sold to the customer; otherwise, such items will 
be deemed to ha\e been used by the printer, and the cost price of same will be subject to the one per- 
cent rate of tax. 

(f) Sales to commercial printers and publishers of tangible personal property which is not resold as 
such or which does not become an ingredient or component part of the tangible personal property 
which they produce for sale or which is not production machinery or parts therefor and accessories 
thereto are subject to the four percent (three percent until July 16, 1991) state tax and any applicable 
local sales or use tax without any maximum tax. 



6:B NORTH CAROLINA REGISTER September 50, 1991 900 



FINAL RULES 



(g) The provisions of Paragraphs (c) and (d) of this Rule have no application to sales of printing 
equipment and supplies to firms which operate print shops for the production of printed matter for 
their own use and not for sale. Purchases of printing equipment and supplies by such firms are subject 
lo the four percent (three percent until July 16, 1991) state tax and any apphcable local sales or use tax. 

History' \ote: Statutory Authority Cj.S. 105-164.4; 105-164.5; 105-164.6; 105-164.13; 
105-262; 105-264; 
Eff. February 1 , 1976; 
Amended Eff. October I. 1991; February /, 1988; April f 1986; February I. 1986. 

.4706 OFFSET PRINTING EQUIPMENT 

Sales of offset or direct relief duplicating machines and repair parts and accessories for such machines, 
Lncluding offset blankets and plates, to commercial prmters for use in the production of printed matter 
for sale are subject to the one percent rate of tax with a maximum tax of eighty dollars ($80.00) per 
article. S;des of positives and negatives to commercial printers for use in preparing plates for use in the 
printing process are also subject to the one percent rate of tax with a maximum tax of eighty dollars 
($80.00) per article. Sales of such items to consumer printers for use or consumption are subject to the 
four percent (three percent untd July 16, 1991) state tax and any applicable local sales or use tax. 

History Note; Statutory Authority G.S. 1 05- 1 64.4; 105-164.6; 105-262; 
Eff Febmary I. 1976; 
Amended Eff October I, 1991. 

.4707 PRINTING CHEMICALS 

Sales of chemicals to commercial printers or publishers which enter into or become an ingredient or 
component part of printed matter which such purchasers sell are exempt from sales and use tax. 
Chemicals used by commercial printers and publishers to clean printing machinery are subject to the 
one percent rate of tax. Chemicals used by commercial printers and publishers for sanitation purposes 
are subject to the four percent (three percent until July 16, 1991) state tax and any apphcable local sales 
or use tax. 

History Sote: Statutoiy Authority G.S. 105- J 64.4; 105-164.6; 105-262; 
Eff. February f 1976; 
Amended Eff October I. 1991; July 5, I9S0. 

.4708 POSTAGE CHARGES BY PRINl ERS 

When a printer purchases postal cards or stamped envelopes and prints and sells them to customers 
for use, the printer is liable for collecting and remitting the four percent (three percent until July 16, 
1991) state tax and any apphcable local sales or use tax on the charge to the customer; except the 
postage charges on the pnnted cards or envelopes are exempt from tax when separately stated on the 
customer's invoice. 

Histon- Sote: Statutory Authority G.S. 105-164.3; 105-164.4; 105-164.6; 105-262; 
Eff FebnavT I. 1976: 
Amended Eff October f 1991; July 5, 1980. 

.4710 BOOKBINDERS 

(a) Persons engaged in the business of binding books, magazines, or other printed matter belonging 
to other persons are rendering services, and the receipts therefrom are not subject to sales or use tax. 
Sales of cloth, leather, Ciudboard, glue, thread or other such items of tangible personal property to 
bookbinders for use in performing such services are subject to the four percent (three percent until July 
16, 1991) state tax and an\' applicable local sales or use tax. 

(b) Sales of cloth, leather, cardboard, glue, thread or other such items of tangible personal property 
to registered bookbinders for use in binding their own books, magazines or other printed matter for sale 
or for use in making loose-leaf or detachable binders for sale are wholesale sales and are exempt from 
tax when supported by properly completed certificates of resale. Form E-590. Such bookbinders must 
collect and remit the four percent (three percent until July 16, 1991) state tax and any applicable local 
sales or use tax on their retail sales of tangible personal property. 



901 6:13 NORTH CAROLINA REGISTER September 30, 1 99 1 



FINAL RULES 



History Note: Statutory Aulhoritv G.S. 105-164.4: 105-164.5; 105-164.6; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I. 1991. 

.4713 TVPEWTIITERS SOLD TO PRINTERS 

Sales of typewriters to commercial printers to be used in the printing process are taxable at the one 
percent rate of tax. Typewriters used for administrative purposes are subject to the four percent (three 
percent until July 16, 1991) state tax and any applicable local sales or use tax. 

Historv Note: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October I, 1991. 

.4715 NEWSPAPER PUBLISHERS: MACHESERY 

Sales of printing machines to newspaper publishing companies are subject to the one percent rate of 
tax with a maximum tax of eighty dollars ($80.00) per article when the machines are used to produce 
newspapers or other printed material for sale. Sales of machines to newspaper publishing companies 
for use in printing their customers' addresses are subject to the four percent (three percent until July 
16, 1991) state tax and any applicable local sales or use tax without any maximum tax applicable 
thereto. Sales of addressograph plates to commercial printers for use in the mailing and shipping 
process are subject to the four percent state tax and any applicable local sales or use tax. 

Historv Note: Statutory^ Authority G.S. 105-164.4: 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1. 1991. 

.4716 TVPESETTESG 

Charges made by typesetters for settirig type for users, are charges for ser\'ices rendered and receipts 
therefrom are exempt from tax. Typesetters are liable for remitting the four percent (three percent until 
July 16, 1991) state tax and any applicable local sales or use tax on purchases of metal or other tangible 
personal property for use in performing such sen'ices. Charges by typesetters to commercial printers 
for reproduction proofs used in the production of printed matter are not subject to the tax. Purchases 
of proof paper and ink by typesetters for use in the production of proofs for sale are subject to the four 
percent state tax and any applicable local sales or use tax. 

Histon' Note: Statutory Authoritv G.S. 105-164.3; 105-164.4; 105-164.6; 105-262; 
Eff Febi-uary 1, 1976; 
Amended Eff October 1, 1991; October 1, 1990. 

SECTION .4900 - TRANSPORTATION CHARGES 



.4902 SHIPMENTS EROM XMTHIN NORTH CAROLESA 

(a) Freight, delivery or other transportation charges made or paid in connection with the sale or 
purchase of tangible personal property are subject to four percent (three percent until July 16, 1991) 
state tax and any applicable local sales or use tax when the shipment originates within this state unless 
title to the transported property passes to the vendee at the point of origin, or the sale of the property 
being transported is exempt from sales and use tax. Except as provided by Paragraph (c) of this Rule, 
or unless the terms of the sale dictate otherwise, title to property being transported is deemed to have 
passed to the purchaser at the point of origin only when: 

(1) The vendor delivers the property to a common carrier or other carrier for hire, including the 
U.S. mails, for delivery to the \'endee; or 

(2) When the vendor delivers the property to the vendee or his agent for transportation by the 
vendee or his agent. 

(b) Except as provided by Paragraph (a) of this Rule, when the vendor prepays transportation charges 
connected with the taxable sale or purchase of tangible personal property, the tax shall be computed 
on the total amount charged for the property and for transporting the same, even though the trans- 
portation charges are billed separately or are separately stated on the invoice for the property. 



6:U NORTH CAROLINA REGISTER September 50, 1991 902 



FINAL RULES 



(cj In the case of so-called delivered price shipments or shipments FOB the place of destination, the 
sales and use tax must be computed on the delivered price without any deduction for transportation 
charges included therein. When tangible personal property the sale or purchase of w hich is subject to 
tax is delivered freight prepaid and allowed or freight collect and allowed, the sales or use tax must be 
computed on the total sales or purchase price of the property before any allowance for transportation 
charges is deducted. 

lliston Sole: Slatuiory Auihoritv G.S. 105-164.12; 105-262; 
Eff. Februan- 1. 1 9" 6; 
Amended Eff. October 1, 1991. 

SECTION .5000 - EVEGI ASSES .AND OTHER OPHTHAEMIC AIDS AND SUPPLIES: 
OCLLISTS: OPTOMETRISTS AND OPTICIANS 



.5003 OPHTHALMIC INSTRUMENTS 

Sales of ophthalmic instruments and supplies to physicians, oculists, optometrists and other users are 
subject to the four percent (three percent until July 16, 1991) state tax and any applicable local sales 
or use tax. 

Ilisior: Sole: Statutory Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff. Februan' 1. 1976; 
Amended Eff. October 1, 1991. 

.5004 TAXABLE OPTICAL SUPPLIES 

(a) -All sales to users or consumers of eyeglass frames, sunglasses not ground on prescription, solutions 
for cleaning eyeglasses, telescopes, binoculars, opera glasses, and similar items, by whomsoever made, 
are subject to the four percent (three percent until July 16. 1991) state tax and any applicable local sales 
or use tax and all persons, including opticians, optometrists, and oculists, making such sales are required 
to register as retail merchants and to collect and remit the tax due thereon. 

(b) The statutory exemption and the exemption provisions of tliis Rule ha\'e no application whatever 
to retail sales of eyeglasses or other optical goods not prescribed by licensed refractionists and all such 
sales are subject to the four percent (three percent until July 16, 1991) state tax and any applicable local 
sales or use tax. 

History- Sate: Statutory Authoritv G.S. 105-164.4; 105-164.6; 105-262; 
Eff February' 1. 1976; 
Amended Eff October 1, 1991. 

SECTION .5100 - LEASED DEPARTMENTS AND TRANSIENT SELLERS 



.5102 TRANSIENT SELLERS 

(aj Persons engaged in any form of retail sellmg. whether through stores, from private residences, from 
trucks and wagons, by house-to-house canvass, or in any other manner whatsoever, are required to 
register with the department and to collect and remit the four percent (three percent until July 16. 1991) 
state tax and any appUcable local sales or use tax. Sales of products of the farms, forests and waters 
in their original or unmanufactured state by producers in their capacity as producers are. however, ex- 
empt from the tax. Producers are deemed to be scUing in their capacity as producers when making sales 
on foot or from trucks or wagons. 

(b) Because of the transient character of persons who sell at retail from other than stores regularly 
established and carrying a stock of goods on hand at ail times in North Carolma from which sales may 
be made at retail, such persons may be required, as a condition of their obtainmg a retailer's hcense, 
to post with the secretary a suitable bond payable to the state, conditioned upon their full compliance 
uith the provisions of the Sales and Use Tax Law, and their accounting to the secretary for all moneys 
due thereunder. 

Histon; Sate: Statutory Authoritv G.S. 105-164.4; 105-164.13; 105-262; 
Eff Februaiy 1. 19" 6; 



903 6:13 NORTH CAROLINA REGISTER September iO, 1991 



FINAL RULES 



Amended Eff. October I, 1991. 

SECTION .5200 - BABY CHICKS AND POULTS 



.5201 CHICKS: EGGS: EXEMPTION 

The following sales are exempt from tax: 

(1) sales of baby chicks and poults to poultry farmers, egg producers and hatcheries for commercial 
poultry' or egg production; 

(2) sales of eggs to be used in hatching baby chicks and poults which will be sold or used for com- 
mercial poultry or egg production; 

(3) all sales of eggs, baby chicks and poults for resale, irrespective of by whom sold; 

(4) sales of eggs, baby chicks and poults by egg producers and poultry farmers when such sales are 
made by them in their capacity as producers; Generally, hatcheries do not qualify as producers of 
farm products within the provisions of G.S. 105-164.13(3). Hatchery sales which are not exempt 
under (1), (2) or (3) of this Rule are subject to four percent (three percent until July 16, 1991) state 
tax and any applicable local sales or use tax. 

History Note: Statutor\> Authority G.S. 105-164.13; 105-262; 
Eff. February I, 1976; 
Amended Eff. October I, 1991. 

.5202 CHICKS: EGGS: TAXABLE 

All sales of eggs, baby chicks and poults which do not qualify for exemption under one or more of 
the provisions above set forth in 17 NCAC 7B .5201 are subject to the four percent (three percent until 
July 16, 1991) state tax and any applicable local sales or use tax. 

History Note: Statutorv Authority G.S. 105-164.4; 105-164.6; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

SECTION .5400 - EORMS USED FOR SALES AND USE TAX PURPOSES 



.5432 AFFIDAVIT FORM: E-589 

The /Vffidavit Form, E-589, is to be completed by contractors and subcontractors and furnished to 
their suppliers to be used in connection with sales or purchases of building materials for use in the 
performance of lump sum or unit price contracts entered into or awarded prior to July 16, 1991, or 
awarded pursuant to bids made prior to July 16, 1991. This Affidavit is to be executed by contractors 
and subcontractors to their suppliers of building materials and is valid only when used in connection 
with the additional one percent state sales and/or use taxes. 

History Note: Statutory Authority G.S. 105-164.15; 105-262; 
Eff February 1, 1976; 
Amended Eff October 1, 1991. 

.5443 SALES AND USE TAX CHART: E-502C: SIX PERCENT 

The sales and use tax chart, E-502C, shows the amount of six percent sales or use tax to be collected 
on retail sales indicated. The form is sent to taxpayers for use as a guide in determining the six percent 
tax to be charged on sales. 

History Note: Statutory Authority G.S. 105-164.15; 105-262; 
Eff January 3. 1984; 
Amended Eff October 1, 1991; August 1, 1988. 

.5448 SCRAP TIRE DISPOSAL TAX REPORT FORM: E-500G 

The Scrap Tire Disposal Tax Report Form, E-500G, is for use by taxpayers to report the one percent 
scrap tire disposal tax liability. An initial supply of report forms is sent to taxpayers who request them 
and an additional supply is furnished on an annual basis thereafter. 



6:15 NORTH CAROLINA REGISTER September iO, 1991 904 



FINAL RULES 



History \ote: Statutory Auihoritv G.S. 105-164.15; 105-262; I30A-309.54; J30A-309.56; 
liff. Julv I. 1990; ' 
Amended Eff. October 1, 1991. 

.5459 CLAIM FOR REFL^D OF COLA TV SALES AND USE TAXES FORAL E-585E 

The Claim for Refund of County Sales and L'sc Taxes Form, E-585E. is to be used by state agencies 
to request a quarterly refund of local sales and use taxes paid by a state agency on direct purchases of 
tangible personal property and local sales and uses taxes paid indirectly by the state agency on building 
materials, supplies, fixtures, and equipment that become a part of or annexed to a building or structure 
that is being erected, altered, or repaired and is owned or leased by the state agency. 

Uistoty Sate: Statutorv Authority G.S. 105-164.14; 105-164.15; 105-262; 105-264; 
Eff. October I. 1991. 

SLBCHAPTER 7C - LOCAL GO\ ERNMENT: MECKLENBl RG COLA TV: SUPPLEMENTAL 
LOCAL C,0\ ERNMENT AND ADDITIONAL SUPPLEMENTAL LOCAL GOVERNMENT 

SALES AND USE TAX ACTS 



SECTION .onto - LOCAL GO\ ERNMENT SALES .\ND USE TAXES 



.0103 SALES TAX IMPOSED 

(a) Every retailer whose place of business is located in a county wliich has levied the Mecklenburg 
County or the local government sales and use tax and the supplemental local government and the ad- 
ditional supplemental local government sales and use tax is required to collect and remit to the North 
Carolina Secretary of Revenue any applicable local sales tax on: 

(1) the sales price of those articles of tangible personal property now subject to the four percent 
(three percent until July 16, 1991) sales tax unposed by the state under G.S. 105-164.4(a)(r) and 
(4b) but not on sales of electricity, piped natural gas or local telecommunications ser% ices taxed 
under G.S. 105-164.4(a)(4a), and toll or private telecommunications services ta.xed under G.S. 
105-164.4(a)(4c); 

(2) the gross receipts deri\ed from the lease or rental of tangible personal property when the lease 
or rental of the property is subject to the four percent (three percent until July 16, 1991) sales 
tax imposed by the state under G.S. 105- 164.4(a)(2); 

(3) the gross receipts derived from the rental of any room or lodging furnished by any hotel, motel, 
inn, tourist camp or other similar accommodations now subject to the four percent (three per- 
cent untU July 16, 1991) sales tax imposed by the state under G.S. 105- 164.4(a)(3): and 

(4) the gross receipts deri\ed from services rendered by laundries, dry cleaners, cleaning plants and 
similar type businesses now subject to the four percent (three percent until July 16, 1991) sales 
tax imposed by the state under G.S. 105- 164.4(a)(4). 

(b) All retailers making taxable sales from a place of business located within a taxing county must 
collect and remit any apphcable local sales tax of the county in which the retailer's place of business is 
located. EtTecti\e March 1, 198S, for local sales tax purposes, the situs of a sale is the retailer's place 
of business located within a taxing county where the retailer becomes contractually obligated to make 
the sale. The term "place of business located within a taxing county" shall mean stores, warehouses, 
sales offices, sales outlets, in\'entories, and other places within a ta.xing county where tangible personal 
property is maintained for sale, lease, or rental at retail, and it shall include inventories of goods carried 
on foot or in \ehicles for sale to customers in a taxing county. It shall also include laundries, dry 
cleaning plants, or similar businesses and hotels, motels, or similar facilities in a taxing county. Taxable 
tangible personal property sold at a business location in a taxing county and deh\ercd by retailers, their 
agents, the L'.S. .\lail. or by common carrier to the purchaser in that county or in any county in this 
state is subject to the sales tax of the county in which the retailer's place of business is located at which 
such retailer becomes contractually obUgated to make the sale. 

Uiston- Sate; Statutory Authority G.S. 105-262: 105-467; 
Eff February 1. 19''6; 
Amended Eff October 1. 1991; May I, 1990; July I. I9S9; December I. 19SS. 



905 6:13 NORTH CAROLINA REGISTER September 30, 1991 



FINAL RULES 



.0104 USE TAX IMPOSED 

(a) A local use tax is levied on the cost price of each item or article of tangible personal property 
which is used, consumed or stored for use or consumption in a taxing county and such use tax may 
be imposed only on those items of tangible personal property upon which the state now levies a four 
percent (three percent until July 16, 1991) use tax under G.S. 105-164.6. Ever>' retailer engaged in 
business in this state and in the taxing county and required to collect the use tax levied by G.S. 
105-164.6 shall also collect the applicable local use tax and remit same to the North Carolina Secretary 
of Revenue when such property is to be used, consumed or stored in the taxing county. The use tax 
shall be levied against the purchaser and his liability for such tax shall be extinguished only upon his 
payment of the tax to the retailer, where the retailer has charged the tax, or to the Secretary of Revenue 
where the retailer has not charged the tax. Every person who purchases any taxable tangible personal 
property for use or consumption in a ta.xing county from vendors located outside North Carolina or 
outside the purchaser's county on which the local tax was not required to be collected by the vendors 
must report and remit the applicable use tax to the Secretary of Revenue. 

(b) Where a local sales or use tax has been paid with respect to such tangible personal property by 
the purchaser thereof, either in another taxing county within this State or in a taxing jurisdiction outside 
this State w^here the purpose of the tax is similar in purpose and intent to the local sales or use tax which 
is imposed within this State, said tax may be credited against the local use tax due. If the amount of 
local sales or use tax paid in another taxing county or jurisdiction is less than the amount of tax due 
the taxing county, the purchaser shall pay to the Secretary of Revenue an amount equal to the differ- 
ence between the amounts so paid in the other taxing county or jurisdiction and the amount due Ln the 
taxing county. No credit shall be allowed for sales and use taxes paid in a taxing jurisdiction outside 
this State if that taxing jurisdiction does not allow a credit for local government sales taxes paid in this 
State. The local use tax will not be subject to credit for payment of any state sales or use tax not im- 
posed for the benefit and use of counties and municipalities. 

History Note: Statutory Authority G.S. 105-262; 105-468; 
Eff. February I, 1976; 
Amended Eff. October I, 1991; Julv /, I9S9; December I. I9SS; August I, I98S. 



6:B NORTH CAROLINA REGISTER September 30, 1991 906 



LIST OF RULES CODIFIED 



The List of Rules C 


odified is a listing ofndes that were filed with OAIl in the month indicated. 


Key: 






Citation 




= Title, Chapter, Subchapter and Rule(s) 


AD 




= Adopt 


AM 




= Amend 


RP 




= Repeal 


With Chgs 




= Final text differs from proposed text 


Eff. Date 




= Date rule becomes effective 


Temp. Expires 


= Rule was filed as a temporary ride and expires on this date 



NORTH CAROLINA ADMINISTRAITV E CODE 
Al GLST 1991 



TITLE DEPARIMENT 



T 


AuricLilturc 


4 


Economic ;ind Conimumtv 




Development 


9 


Governor 


10 


Human Resources 


11 


Insurance 


13 


Labor 


15A 


En\ironment, Health, 




and Natural Resources 


16 


Public Education 



TITLE DEPARIMENT 

17 Revenue 

19A Transportation 
21 Occupational Licensing Boards 

8 - CPA Examiners 

14 - Cosmetic Art Examiners 

32 - Medical Examiners 

36 - Nursing 

46 - Pharmacy 

54 - Practicing Psychologists 
26 Administrative Hearines 



Citation 


An 


AM 


RP 


With 
Chgs 


KfT. 
Dale 


Temp, 
t.vpires 


2 NCAC 9L .0602 - .0603 




• 






10 01 91 




4 NCAC 6C .0305 




• 






10 01 91 




') NC;\C 2B Rxcc. Order No. 147 










0" 31) 91 




E.xcc. Order No. 148 










OX 06 91 




11) NCAC^ 3C .0102 




• 




• 


10 01 91 




.0207 


• 








10 01 91 




.0303 








• 


10 01 91 




.0510 








• 


10 01 91 




.0511 










10 01 91 




.0T02 










10 01 91 




.0705 










01 01 92 




.0707 








• 


10 01 91 




.0710 










10 01 91 




.0''I1 








• 


10 01 91 





907 



6:13 NORTH CAROLIN.i REGISTER September iO, 1991 



LIST OF RULES CODIFIED 



Citation 


AD 


AM 


RP 


With 
Chgs 


EfT. 
Date 


Temp. 
Expires 


10 NCAC 3U .0712 -.0713 










01 01 92 




.0714 








• 


10 01 91 




.0802 








• 


10 01 91 




.0901 










10 01 91 




.1003 










10 01 91 




.1403 










01 01 92 




.1612 










10 01 91 




.1717 








• 


01 01 92 




.1903 










10 01 91 




.2206 








• 


10 01 91 




.2508 








• 


10 01 91 




.2510 










01 01 92 




.2606 










10 01 91 




.2611 










01 01 92 




26D .0016 










08 1591 


02 15 92 


26H .0101 










10 01 91 




.0102 - .0104 








• 


10 01 91 




.0107 










08 01 91 


01 31 92 


.0107 








• 


10 01 91 




.0209 


• 








08 01 91 


01 31 92 


.0508 










08 01 91 


01 31 92 


50B .0204 










10 01 91 




.0305 










10 01 91 




51C .0108 










08 01 91 


01 28 92 


11 NCAC 8 .0815 








• 


10 01 91 




13 NCAC 7C .0101(a)(93)(L) 










08 26 91 




.0101(a)(26) 










08 23 91 




15.\ NC-\C 2D .0505 






• 




10 01 91 




.0535 








• 


10 01 91 




.1105 










10 01 91 




.1201 - .1206 


• 






• 


10 01 91 




.1207 


• 








10 01 91 




.1209 


• 






• 


10 01 91 




2H .0603 




• 




• 


10 01 91 




.0610 




• 




• 


10 01 91 




7L .0101 




• 






10 01 91 




.0302 




• 






10 01 91 





6:13 NORTH CAROLINA REGISTER September 30, I99I 



90S 



LIST OF RULES CODIFIED 



Citation 


.\D 


.AM 


RP 


With 
Chgs 


EfT. 
Date 


Temp. 
Expires 


15.-\ \C.\C 7L .0304 




• 






10 01 91 




lOK .0001 


• 






• 


10 01 91 




12C .0306 


• 








08 12 91 


02 08 92 


19.A .0202 




• 






10 01 91 




191 .0101 - .0105 
transferred and 
recodified to 
15.A NC,AC21E 
.0401 - .0405 










08 28 91 




21 E .0401 - .0405 

Transferred and 
recodified from 
\S\ NC.-\C 191 
.0101 - .0105 










08 28 91 




16 \C.\C 6D .0102 




• 






08 12 91 


02 0- 92 


6E .0301 - .0303 


• 








08 12 91 


02 0- 92 


r \C\C 3B .010' 










10 01 91 




3C .0001 










10 01 91 




.0004 










10 01 91 




.0006 










10 01 91 




4C .0505 


• 








10 01 91 




4D .0303 










10 01 91 




.0305 










10 01 91 




.0401 










10 01 91 




.0501 










10 01 91 




.0505 - .0506 










10 01 91 




.0507 






• 




10 01 Ql 




.0508 - .0509 


• 








10 01 91 




.0602 - .0606 










10 01 91 




.0608 










10 01 91 




.0610 




• 






10 01 'n 




.O'Ol - ,0"02 










10 01 91 




.0-06 • .0-08 










10 01 91 




.0-10 - .0-11 










10 01 91 




.0801 - .0803 










10 01 91 




.0805 - .0806 










10 01 91 




.0808 










10 01 91 




.0901 










10 01 91 




.0902 - .0903 




• 






10 01 91 




.0904 - .0905 






• 




10 01 91 




.090- - .0909 


• 








10 01 91 





909 



6:13 NORTH CAROLLXA REGISTER September 30, 1991 



LIST OF RULES CODIFIED 



Citation 


AD 


AM 


RP 


With 
Chgs 


EfT. 
Date 


Temp. 
Expires 


17 NCAC 4D .1001 - .1002 


• 








10 01 91 




4F .0005 


• 








10 01 91 




6B .0101 










10 01/91 




.0104 










10 01 91 




.0107 










10 01 91 




.0110 










1001 91 




.0114 - .0117 










10 01, 91 




.0606 










10 01 91 




.3202 










10 01 91 




.3406 










1001 91 




.3513 










10 01 91 




.3528 


• 








1001 91 




.3716 










10 01 91 




.3718 










10 01 91 




.3724 










10 01 91 




.3804 










10 01 91 




.4003 










10 01 91 




.4102 










10 01 91 




6C .0103 






• 




10 01 91 




.0105 










10 01 91 




.0109 










10 01 91 




.0123 










10 01 91 




.0203 










10 01 91 




.0301 - .0304 






• 




10 01 91 




6D .0102 










10 01 91 




.0206 










10 01 91 




.0209 










10 01 91 




7B .0101 










10 01 91 




.0104 










10 01 91 




.0109 










10 01 91 




.0111 










10 01,91 




.0115 - .0116 










10 01 91 




.0126 


• 








10 01 91 




.0202 










10 01 91 




.0301 - .0302 










10 01 91 




.0403 - .0407 










10 01 91 




.0502 










10 01 91 




.0602 - .0604 










10 01 91 





6:13 NORTH CAROLINA REGISTER September 30, 1991 



910 



LIST OF RULES CODIFIED 



Citation 


.\D 


AM 


RP 


With 
Chgs 


Efr. 

Date 


Teinp. 
Expires 


r NC.AC ''B .0610 










10 01 91 




.0615 










10 01 91 




.0617 - .0618 










10 01 91 




.0621 










10 01 91 




.0624 










10 01 91 




.0626 - .0633 










10 01 91 




.0702 










10 01 91 




.0704 - .0708 










10 01 91 




.0710 - .0714 










10 01 91 




.0716 










10 01 91 




.0801 










10 01 91 




.0803 










10 01 91 




.0805 - ,0806 










10 01 91 




.0811 










10 01 91 




.0901 - .0902 










10 01 91 




.1001 - .1003 










10 01 91 




.1101 










10 01 91 




.1107 










10 01 91 




.1111 










10 01 91 




.1113 










10 01 91 




.1115 










10 01 91 




.1118 










10 01 91 




.1122 










10 01 91 




.1201 • .1202 










10 01 91 




.1301 - .1303 










10 01 91 




.1402 - .1404 










10 01 91 




.1501 










10 01 91 




.1601 - .1602 










10 01 91 




.1701 - .ro3 










10 01 91 




.1705 - .^06 










10 01 91 




.1801 - .1802 










10 01 91 




.1804 ■ .1805 










10 01 91 




.1905 










10 01 91 




.1907 


• 








10 01 91 




.2001 - .2002 










10 01 91 




.2101 










10 01 91 




.2103 










10 01 91 




.2105 










10 01 91 





911 



6:13 NORTH CAROLINA REGISTER September 30, 1991 



LIST OF RULES CODIFIED 



Citation 


AD 


AM 


RP 


With 
Chgs 


Efr. 

Date 


Temp. 
Expires 


17 NCAC 7B .2201 - .2205 










10 01 91 




.2207 










10 01 91 




.2212 










10 01 91 




.2401 










10 01 91 




.2502 - .2503 










10,01 91 




.2601 - .2608 










10 01 91 




.2611 










10 01 91 




.2701 - .2702 










10 01 91 




.2801 - .2802 










10 01 91 




.2902 










10 01/91 




.3002 










10 01 91 




.3004 










10 01 91 




.3009 - .3012 










10 01 91 




.3101 ■ .3103 










10 01 91 




.3106 










10 01 91 




.3201 - .3203 










10 01 91 




.3301 - .3302 










10 01 91 




.3401 - .3403 










10 01 91 




.3501 - .3502 










10 01 91 




.3505 










10 01 91 




.3601 










10 01 91 




.3701 - .3703 










10 01 91 




.3801 - .3804 










10 01 91 




.3901 - .3905 










10 01 91 




.4003 










10 01 91 




.4006 










10 01 91 




.4101 - .4107 










10 0191 




.4109 










10 01 91 




.4202 - .4203 










10 01 91 




.4206 - .4207 










10 01 91 




.4402 - .4403 










10 01 91 




.4406 










10 0191 




.4414 - .4415 










10 01 91 




.4416 


• 








10 01 91 




.4501 - .4503 










10 01 91 




.4506 










10 01 91 




.4509 










1001 91 




.4601 - .4604 










10 0191 





6:13 NORTH CAROLINA REGISTER September 50, 1991 



912 



LIST OF RULES CODIFIED 



Citation 


AD 


AM 


RP 


With 
Chgs 


EfT. 
Date 


Temp. 
Expires 


r N( \C 7B .4609 










10 01 91 




.4614 - .4615 










10 01 91 




.4618 - .4614 










10 01 91 




.4701 










10 01 91 




.4706 - .4708 










10 01 91 




.4710 










10 01 91 




.4713 










10 01 91 




.4715 - .4716 










10 01 91 




.4902 










10 01 91 




.5003 - .5004 










10 01 91 




.5102 










10 01 91 




.5201 - .5202 










10 01 91 




.5432 










10 01 91 




.5443 










10 01 91 




.5448 










10 01 91 




.5459 










1001 91 




"C .0103 -.0104 










10 01 91 




8 .0506 










10 01 91 




.0403 - .0404 










10 01 91 




9r .0003 










10 01 91 




9G .0103 






• 




1001 91 




.0104 - .0105 




• 






10 01 91 




.0106 






• 




10 01 91 




.0204 






• 




10 01 91 




.0401 






• 




10 01 91 




.0404 




• 






10 01 91 




.0510 




• 






10 01 91 




9H .0101 






• 




10 01 91 




.0102 - .0103 




• 






10 01 91 




.0104 






• 




10 01 91 




.0302 - .0304 




• 






1001 91 




.0403 




• 






10 01 91 




.0408 




• 






m 01 91 




9J .0203 




• 






10 01 91 




91 .0201 




• 






10 01 91 




.0304 




• 






10 01 91 




.0506 




• 






10 01 91 




19..\ NCAC: 2A .0102 




• 






10 01 91 





913 



6:13 NORTH CAROLINA REGISTER September 30, 1991 



LIST OF RULES CODIFIED 



Citation 


AD 


AM 


RP 


\\ith 
Chgs 


Eff. 
Date 


Temp. 
E.xpires 


19A NCAC 2B .0102 




• 






10 01,91 




.0143 - .0144 




• 






10 01 91 




.0163 


• 








10 01 91 




.0201 




• 






10 01 91 




.0208 




• 






10 01 91 




2D .0414 




• 






10 01,91 




.0425 


• 








10 01 91 




.0601 - .0602 




• 






10 01 91 




.0603 - .0606 






• 




10 01 91 




.0607 




• 






10 01 91 




.0608 - .0611 






• 




10 01 91 




.0612 




• 






10 01 91 




.0613 - .0615 






• 




10 01 91 




.0617 






• 




10 01,91 




.0619 - .0622 






• 




10 01 91 




.0623 - .0627 






• 




10 01 91 




.0629 






• 




10 01 91 




.0630 - .0632 






• 




10 01 91 




.0633 




• 






10 01 91 




.0634 - .0639 






• 




10 01 91 




.0641 






• 




10 01 91 




.0818 










10 01 91 




.0825 










10 01 91 




21: .0207 










10 01 91 




.0210 










10 01 91 




.0216 










10 01 91 




.0218 - .0219 










10 01 91 




.0222 










10 01 91 




.0404 










10 01 91 




.0407 










10 01 91 




.0417 










10 01 91 




.0425 


• 








10 01 91 




.0701 - .0702 










10 01 91 




.0801 - .0803 










10 0! 91 




.0901 - .0906 


• 








10 01 91 




3D .0515 










10 01 91 




.0801 










10 01 91 




3J .0803 










10 01 91 





6:13 NORTH CAROLINA REGISTER September 30, 1991 



914 



LIST OF RULES CODIFIED 



Citation 


.\D 


AM 


RP 


With 
Chgs 


EfT. 
Date 


Temp. 
E.xpires 


IVA NCAC 3J .0901 - .0907 


• 








10 01 91 




8G .0306 










10 01 91 




1 4A .0101 










10 01 91 




14F .0008 








• 


10 01 91 




3211 .0402 








• 


10 01 91 




.0406 










10 01 91 




36 .0211 










10 01 91 




.0223 








• 


10 01 91 




.0401 










10 01 91 




46 .2901 


• 






• 


10 01 91 




54 .1703 










10 01 91 




.1704 








• 


10 01 91 




.1706 


• 








10 01 91 




.1802 - .1803 










10 01 91 




.1902 - .1904 










10 01 91 




.2001 - .2002 










10 01 91 




.2004 










10 01 91 




.2006 


• 








10 01 91 




.2101 










10 01 91 




26 NCAC 2A .0205 










10 01 91 


03 29 92 


.0301 










10 01 91 


03 29 92 


.0303 


• 








10 01 91 


03 29 92 


.0402 - .0404 










10 01 91 


03 29 92 


2B .0201 - .0202 










10 01 91 


03 29 92 


.0301 - .0302 










10 01 91 


03 29 92 


.0303 


• 








10 01 91 


03 29 92 


.0401 










10 01 91 


03 29 92 


3 .0002 - .0004 










10 01 91 




.0009 










10 01 91 




.0013 










10 01 91 




.0019 










10 01 91 




.0026 










10 01 91 




.0030 










10 01 91 





915 



6:13 NORTH CAROLINA REGISTER September 30, 1991 



ARRC OBJECTIONS 



1 he Administrative Rules Review Commission (ARRC) objected to the following rules in accordance 
with G.S. I43B-30.2(c). State agencies are required to respond to ARRC as provided in G.S. 
l43B-30.2(d). 



T. 



emporary Rules are noted by "*". These Rules have already gone into effect. 



ECONOMIC AND COMMUNITY DEVELOPMENT 



Emplo\ ment and Training 



* 4 NCAC 20B 

* 4 NCAC 20B 

* 4 \CAC 20B 

* 4 .\CAC 20B 

* 4 XCAC 20B 

* 4 XCAC 20B 

EDUCATION 



.0903 - Allocation of Grants 

.0905 - Eligibility 

.0907 - Cost Limitations 'Categories 

.0908 - Reporting 

0909 - Performance Standards 

.091 1 - Fund Availability 



ARRC Objection 8; 221 9 1 

ARRC Objection 8122/9/ 

ARRC Objection 8122/9/ 

ARRC Objection 8:22/9/ 

ARRC Objection 8122/9/ 

ARRC Objection 8/22/91 



Elementary' and Secondary Education 

/6 NCAC 6C .0207 - Prospective Teacher Scholarship Loans 

Agency Revised Rule 
* /6 NCAC 6E .030/ - Driver Training 

ENA IRON.MENT, HEALTH, AND NATURAL RESOURCES 

En\u'orLmental Management 

/5A NCAC 2D ./102 - Applicabilitv 

ISA NCAC 2D ./203 - Test Methods and Procedures 

.Agency Revised Rule 

/5.4 NCAC 2D ./208 - Operator Training Requirements 

/5A NCAC 2D .1209 - Compliance Schedules 

Agency Revised Rule 

Adult Health 

ISA NCAC I6A .0804 - Financial Eligibility 

No Response from Agency 

Agency Responded 

No Response from Agency 
ISA NCAC /6A .0806 - Billing the HIV Health Services Program 

No Response from Agency 

Agency Responded 

No Response from Agency 

WiJdlife 

/SA NCAC /OK .0001 - Course Requirements 
Agency Revised Rule 

HUMAN RESOURCES 



ARRC Objection 6/2/ /91 
Obj. Removed 7i/8/9/ 
ARRC Objection 8/22/91 



ARRC Objection 
ARRC Objection 
Obj. Removed 
ARRC Objection 
ARRC Objection 
Obj. Removed 



ARRC Objection 

No Action 
No .Action 
ARRC Objection 

No Action 
No A ction 



8/22/9/ 
8/22/9/ 
8122/9/ 
8/22/9/ 
8/22/9/ 
8/22/9/ 



///8/9I 
2/2S/9/ 
3/2//9/ 
4// 8/9/ 
///8/9/ 
2/25/9/ 
3/2/ /9/ 
4// 8/9/ 



ARRC Objection 7//8/9/ 
Obj. Removed 8/22/91 



6:13 NORTH CAROLINA REGISTER September 30, I99I 



916 



ARRC OBJECTIONS 



Children's Services 

/O \CAC 4/1 .0406 - Responsibility for Training of Team Members 
Pending Correction 

Economic Opportunity 

* /O .\'CAC 5/F .0/02 - Definitions 

* 10 iXCAC 51F .0202 - Ineligible Activities 



* /ONCAC 5/F 

* /O NCAC 5/F 

Facilitv Services 



0402 - lUigibility Requirements 
050/ - Grant Agreement 



/O NCAC 3U .0604 - General Safety Requirements 

/O NCAC 3U .0804 - Infectious and Contagious Diseases 

Individual and Family Support 

/O NCAC 42B ./20/ - Personnel Requirements 

No Response from Agency 

Agency Returned Rule Unchanged 

Agency Filed Rule with OA// 
/O NCAC42C .200/ - Qualifications of Administrator 

No Response from Agency 

.Agency Returned Rule U nchanged 

Agency Filed Rule with 0.4H 
/O NCAC 42C .2002 - Qualifications of Supet^isor-in-Charge 

No Response from Agency 

Agency Returned Rule Unchanged 

Agency Filed Rule with 0.11/ 
/O NCAC 42C .2006 - Qiialijlcations of Activities Coordinator 

No Response from Agency 

Agency Returned Rule Unchanged 

Agency Filed Rule with 0.4// 
/O NCAC42C .330/ - E.xisling Building 

Agency Returned Rule Unchanged 

Agency Filed Rule with OA /i 
/O NC4C 42D ./401 - Qualifications of Administrator/Co-Administrator 

.4gency Returned Rule Unchanged 

Agency Filed Rule with OA// 

Medical Assistance 

10 NCAC 50B .0305 - Depri\-ation 
Agency Revised Rule 

Social Services 

10 NC-\C 24.4 .0303 - Sel County Board .Members,' Social Svcs Comm 
Agency Revised Rule 

INSURANCE 

I'ngineering and Building Codes 

// NCAC 8 .0815 - Final Board Order 



ARRC Objection 


7/18/91 
8/22/91 


ARRC Objection 
ARRC Objection 
ARRC Objection 
ARRC Objection 


8/22/91 
8/22/91 
8/22/91 
8/22/91 


ARRC Objection 
ARRC Objection 


8/22/91 
8/22/91 


ARRC Objection 

No Action 
Rule Eff 


1/18/91 
2/25/91 
3/21/91 
8/01/91 


ARRC Objection 

No Action 
Rule Eff 


1/18/91 
2/25/91 
3/21/91 
8/01/91 


ARRC Objection 

No Action 
Rule Eff 


1/18/91 
2/25/91 
3/21/91 
8/01/91 


ARRC Objection 

No Action 
Rule Eff 


1/18:91 
2/25/91 
3/21/91 
8/01/91 


ARRC Objection 
No A ction 
Rule Eff 


11/14/90 
12/20/90 
5/01/91 


ARRC Objection 
No Action 
Rule Eff 


11/14/90 
12/20/90 
5/01/91 



I 



ARRC Objection 8/22/91 
Obj. Removed S/22/91 



ARRC Objection 4/18/91 
Obj. Removed 7/18/91 



ARRC Objection 7/18/91 



917 



6:13 NORTH CAROLINA REGISTER September 30, I99I 



ARRC OBJECTIONS 



Agency Revised Rule 
LICENSING BOARDS AND COMMISSIONS 

Cosmetic .\rt Exammers 

2/ NCAC I4F .00/0 - Sanitary Rules 

No Response from Agency 

Agency Requested A dditional Time 

Agency Responded Will Repeal Rule 
21 XCAC I4G .0017 - Changes in Teaching Staff 

No Response from Agency 

21 NCAC 141 .0304 - Classroom Work 
No Response from Agency 
Agency Revised Rule 

Medical Examiners 

21 NCAC 32B .0309 - Personal Interview' 
Agency Responded 
Rule Returned to Agency 

Practicing Psychologists 

21 NCAC 54 .1701 - Information Required 
21 NCAC 54 .1704 - Revie^v Procedure 
Agency Revised Rule 
21 NCAC 54 .2103 - Reinstatement 

Real Estate Commission 

21 NCAC 5SC .0302 - Program Structuring 

Agency Revised Rule 
21 NCAC 58D .0201 - Qualifications for Appraiser Licensure and Cert. 

Agency Revised Rule 



Obj. Removed 8122191 



ARRC Objection 5ll6',91 

No Action 7/18;91 
7/18191 

Obj. Removed 8/22/91 

ARRC Objection 5/16/91 

No Action 7/18/91 

Obj. Removed 7/18/91 

ARRC Objection 5/16/91 

No Action 7/18/91 

Obj. Removed 7/18/91 



ARRC Objection 2/25,91 

No Action 3/21191 

5/16/91 



ARRC Objection 8/22/91 

ARRC Objection 8/22/91 

Obj. Removed 8/22/91 

ARRC Objection 8/22191 



ARRC Objection 7/18/91 

Obj. Removed 7/18/91 

ARRC Objection 7/18/91 

Obj. Removed 7/18/91 



6:13 NORTH CAROLINA REGISTER September 30, 1991 



918 



RULES ISVALIDA TED BY JUDICIAL DECISION 



1 his Section of the Register lists the recent decisions issued by the Sorth CaroUna Supreme Court, 
Court of Appeals, Superior Court (when avaihible), and the Office of Administrative Hearings which 
invalidate a rule in the Sorth Carolina Adrrtinistrath'e Code. 



10 yCAC 261 .0101 - PURPOSE: SCOPEjSOTICE OF CHASGE I.\ LEVEL OF CARE 

10 ,\CAC 261 .0102 - REQUESTS FOR RECOSSIDERA TIO.\ A.\D RECIPIEST APPEALS 

10 SCAC26I .0104 - FORMAL APPEALS 

Thomas R. West. Administrative Law Judae with the Office of Administrative Hearines, declared Rules 
10 NCAC 261 .0101. 10 NCAC 261 .0102" and 10 NCAC 261 .0104 void as appHed^'in Linda Allred, 
Petitioner v. Sorth Carolina Department of Human Resources, Division of Medical Assistance, Respondent 
(90 DHR 0940J. 

10 SCAC 421V .0003(c) - COUSTY DEPT OF SOCIAL SERVICES RESP0.\S1BILITIES 
10 SCAC 42fV .0005 - REPORTISG CASES OF RAPE A.\D ISCEST 

The North CaroUna Court of .Appeals, per Judge Robert F. Orr, declared Rules 10 NCAC 42W .0003(cj 
and 10 NCAC 42W .0005 void as applied in Rankin Whittington, Daniel C lludgins. Dr. Takey Crist, 
Dr. Gwendolyn Boyd and Planned Parenthood of Greater Charlotte, Inc., Plaintiffs v. The Sorth Carolina 
Department of Human Resources. David Fla/ierty, in his capacity as Secretary of the Sorth Carolina De- 
partment of Human Resources, The Sorth Carolina Social Services Commission, and C Barry McCarty, 
in his capacity as Chairperson of the Sorth CaroUna Social Services Commission, Defendants [100 N.C. 
App. 603, 39S S.E.2d 40 (1990)|. 

16 SCAC 6D .0105 - USE OF SCHOOL DA Y 

The North Carolina Supreme Court, per Associate Justice Henr>' E. Frve. held invalid Rule 16 NCAC 
6D .0105 as decided in The State of Sorth Carolina; The Sorth Carolina State Board of Education: and 
Bob Etheridge, State Superintendent of Public Instruction, Plaintiffs v. Whittle Communications and The 
Thomasville City Board of Education, Defendant-Counterclaimants and The Davidson County Board of 
Education, Defendant-Intetyenor and Counterclaimant v. The State of Sorth Carolina: The Sorth Carolina 
State Board of Education; and Bob Etheridge, State Superintendent of Public Instruction; and Howard S. 
Haworth; Barbara M. Tapscott; Kenneth R. Harris; Teena Smith Little; W.C. Meekins Jr.; Mary B. 
Morgan; Patricia H. Seal; Gary: C Owen; Donald D. Pollock; Prezell R. Robinson; Sorma B. Turnage; 
State Treasurer Harlan E. Boyles; and Lt. Governor James C Gardner; in their official capacities as 
members of The Sorth Carolina State Board of Education. Counterclaim Defendants [328 N.C. 456, 402 
S.E.2d 556(1991)]. 

ISA SC.4C 7H .0308 - SPECIFIC USE STA.XDARDS 

The North Carolina Court of Appeals, per Judge Sidney S. Eagles Jr., held that it was error for the 
Coastal Resources Commission to fail to foUow the required notice and comment procedure prior to the 
adoption of temporan,- rule 15A NCAC ''M .030S(a)(l)(.M). but that the CRC followed proper procedures 
when it adopted the te.xt of the temporar\- rule as a permanent rule [15--\ NC.-\C 711 .0308(a)(l)(M)]. 
Conservation Council of Sorth Carolina v. 'Haste\\i)2 N.C. App. 411, 402 S.E.2d 44" (1991)|. 



919 6:13 SORTH CAROLISA REGISTER September iO, 1991 



NORTH CAROLINA ADMINISTRA TIVE CODE CLASSIFICA TION SYSTEM 



The North Carolina Administrative Code (NCAC) has four major subdivisions of rules. Two 
of these, titles and chapters, are mandatory. The major subdivision of the NCA C is the title. 
Each major department in the North Carolina executive branch of government has been as- 
signed a title number. Titles are further broken down into chapters which shall be numerical 
in order. The other two, subchapters and sections are optional subdivisions to be used by 
agencies when appropriate. 

TITLE/MAJOR DrV'ISIONS OF THE NORTH CAROLINA ADMINISTRATrVTCODE 



TITLE DEPARTMENT 

1 Administration 

2 Agriculture 

3 Auditor 

4 Economic and Community 

Development 

5 Correction 

6 Council of State 

7 Cultural Resources 

8 Elections 

9 Governor 

10 Human Resources 

1 1 Insurance 

12 Justice 

13 Labor 

14A Crime Control and Public Safety 

15A Environment, Health, and Natural 
Resources 

16 Public Education 

17 Revenue 

1 8 Secretary of State 
19A Transportation 
20 Treasurer 

*21 Occupational Licensing Boards 

22 Administrative Procedures 

23 Community Colleges 

24 Independent Agencies 

25 State Personnel 

26 Administrative Hearings 



LICENSEVG BOARDS 


CHAPTER 


Architecture 


2 


Auctioneers 


4 


Barber Examiners 


6 


Certified Public Accountant Examiners 


8 


Chiropractic Examiners 


10 


General Contractors 


12 


Cosmetic Art Examiners 


14 


Dental Examiners 


16 


Electrical Contractors 


18 


Eoresters 


20 


Geologists 


21 


Hearing Aid Dealers and Fitters 


22 


Landscape Architects 


26 


Landscape Contractors 


28 


Marital & Family Therapy 


31 


Medical Examiners 


32 


Midwifery Joint Committee 


33 


Mortuary Science 


34 


Nursing 


36 


Nursing Home Administrators 


37 


Occupational Therapists 


38 


Opticians 


40 


Optometry 


42 


Osteopathic Examination and 


44 


Registration (Repealed) 




Pharmacy 


46 


Physical Therapy Examiners 


48 


Plumbing, Heating and Fire Sprinkler 


50 


Contractors 




Podiatry Examiners 


52 


Practicing Counselors 


53 


Practicing Psychologists 


54 


Professional Engineers and Land Surve> 


ors 56 


Real Estate Commission 


58 


Refrigeration Examiners 


60 


Sanitarian Examiners 


62 


Social Work 


63 


Speech and Language Pathologists and 


64 


Audiologists 




Veterinary Medical Board 


66 



Note: Title 21 contains the chapters of the various occupational Licensing boards. 



6:13 NORTH CAROLINA REGISTER September 30, 1991 



920 



CUMULA TIVE INDEX 



CUMULA TIVE INDEX 

(April 1991 - March 1992) 



1991 



1992 



Pages 



Issue 



1 
44 
100 
186 
227 
247 
326 
374 
464 
516 
678 
722 
784 



44 1 - April 

99 2 - April 

185 3 - May 

226 4 - May 

246 5 - June 

325 6 - June 

373 ;. 7 - July 

463 8 - July 

515 9 - August 

677 10 - August 

721 11 - September 

783 12 - September 

923 13 - September 



AO - Administrative Order 

AG - Attorney General's Opinions 

C - Correction 

FR - Final Rule 

GS - General Statute 

JO - Judicial Orders or Decision 

M - Miscellaneous 

\P - Notice of Petitions 

PR - Proposed Rule 

SO - Statements of Organization 

TR - Temporary Rule 



ADMINISTRATION 

State Construction, 465 PR 

ADMFSISTRATrV E HEARINGS 

Hearings Division, 310 PR 
Rules Division, 665 PR 

AGRICULTURE 

Food and Drug Protection Division, 576 PR, 725 PR 

Markets, 576 P^R 

North Carolma State Fair, 576 PR 

Pesticide Board, 725 PR 

Plant Industry-, 102 PR, 469 PR, 576 PR 

CORRECTION 

Division of Pnsons, 35 FR, 87 FR, 209 FR, 700 FR 



921 



6:13 NORTH CAROLINA REGISTER September 30, 1991 



CUMULA TIVE INDEX 



CRIME CONTROL AND PUBLIC SAFETY 

State Highway Patrol, Division of, 809 PR 

CULTURAL RESOURCES 

State Library, 686 PR 

ECONOMIC AND CO.NLMUTMTY DEVELOPMENT 

Alcoholic Beverage Control Commission, 4 PR 
Community Assistance, 104 PR 
Credit Union Division, 231 PR, 683 PR 
Employment and Training, 590 PR 

ENVIRONMENT, HEALTH, AND NATURAL RESOURCES 

Coastal Management, 299 PR 

Environmental Management, 197 PR, 271 PR, 447 PR 

Forest Resources, 300 PR 

Health: Epidemiology, 28 PR, 341 PR, 735 PR 

Health Services, 9 PR, 327 PR, 727 PR, 815 PR 

Land Resources, 494 PR, 810 PR 

Marine Fishenes, 122 PR, 690 PR 

Parks and Recreation, 693 PR 

State Registrar, 734 PR 

Water Treatment Facility Operators, 495 PR 

Wildlife Resources Commission, 84 PR, 170 PR, 198 PR, 301 PR, 647 PR, 692 PR 

FINAL DECISION LEH ERS 

Voting Rights Act, 48, 230, 248, 326, 464, 516, 681, 722, 806 

FINAL RULES 

List of Rules Codified, 89 FR, 215 FR, 314 FR, 451 FR, 504 FR, 711 FR, 907 FR 

GENERAL STATUTES 

Chapter 150B, 784 GS 

GOVERNOR/LT. GOVERNOR 

Executive Orders, 1, 45, 100, 186, 227, 247, 374, 678, 804 

HUMAN RESOURCES 

Aging, Division of, 72 PR, 422 PR 

Blind, Senices for, 686 PR 

Economic Opportunity, 604 PR, 689 PR 

Facility Services, 104 PR, 471 PR, 592 PR 

Medical Assistance, 9 PR, 112 PR, 188 PR, 232 PR, 250 PR, 430 PR, 492 PR, 601 PR, 688 PR, 

726 PR, 807 PR 
Mental Health, Developmental Disabilities and Substance Abuse Services, 5 PR, 49 PR, 375 PR, 

449 FR 
Social Services, 116 PR 

rSSURANCE 

Actuarial Services, 119 PR 

Life and Heahh Division, 430 PR 

Special Services Division, 84 PR 

JUSTICE 

Criminal Justice Education and Training Standards, 607 PR 
Private Protective Services, 121 PR 
Sheriffs' Standards Division, 618 PR 
State Bureau of Investigation, 250 PR 



6:15 NORTH CAROLINA REGISTER September 30, 1991 922 



CUMULA TIVE INDEX 



LICENSING BOARDS 

Architecture, Board of, 30 PR, 232 PR 

Certified Public Accountant Examiners, 201 PR 

Cosmetic Art Examiners, 653 PR 

Electrolysis F^xaminers, Board of, 737 PR 

Geologists, Board of, 654 PR 

Hearing Aid Dealers and Fitters, 496 PR, 655 PR 

Landscape Contractors' Registration Board, 665 PR 

Medical Examiners, Board of, 304 PR, 363 PR 

Nursing, Board of, 305 PR 

Pharmacy, Board of, 201 PR 

Physical Therapy Examiners, Board of, 33 PR, 363 PR 

Practicing Psychologists Examiners, 203 PR 

Professional Engineers and Land Sun,'evors, 497 PR 

Real Estate Commission, 171 PR, 500 PR 

PI BLIC EDUCATION 

Elementary and Secondai)-, 29 PR, 199 PR, 303 PR, 694 PR 

REVENUE 

Corporate Income and Franchise Tax Division, 816 FR 
Indi\idual Income, Inheritance and Gift Tax Division, 739 F"R 
Individual Income Tax Division, 234 FR, 747 FR 
Intangibles Tax Division, 766 FR 
License and Excise Tax Division, 740 FR 
Motor Fuels Tax Division, 768 FR 
Property Tax Commission, 210 FR 
Sales and Use Tax, 817 FR 

SECRETARY OF STATE 

Securities Division, 85 PR 

STATE PERSONNEL 

OlTice of State Personnel, 696 PR 

State Personnel Commission, 172 PR, 364 PR 

SI ATE TREASURER 

Retirement Systems, 736 PR 

STATEMENTS OF ORGANIZATION 

Statements of Organization, 518 SO 

TRANSPORTATION 

Division of Motor Vehicles, 213 FR, 502 FR, 701 FR, 773 FR 



925 6:13 NORTH CAROLINA REGISTER September 30, 1991 



NORTH CAROLINA ADMINISTRATIVE CODE 

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